Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dollars are in thousands, the number of shares is shown in thousands too.

Barry Computer Company:
Balance Sheet as of December 31, 2021 (in thousands)
Cash	$	102,850		Accounts payable	$	130,900
Receivables		364,650		Other current liabilities		112,200
Inventories		224,400		Notes payable to bank		46,750
Total current assets	$	691,900		Total current liabilities	$	289,850
				Long-term debt		261,800
Net fixed assets		243,100		Common equity (38,335 shares)		383,350
Total assets	$	935,000		Total liabilities and equity	$	935,000

Barry Computer Company: Income Statement for Year Ended December 31, 2021 (in thousands)
Sales			$	1,700,000
Cost of goods sold
Materials	$714,000
Labor	357,000
Heat, light, and power	119,000
Indirect labor	187,000			1,377,000

Gross profit		$	323,000
Selling expenses			136,000
General and administrative expenses			51,000
Depreciation			68,000
Earnings before interest and taxes (EBIT)		$	68,000
Interest expense			26,180
Earnings before taxes (EBT)		$	41,820
Federal and state income taxes (25%)			10,455
Net income		$	31,365
Earnings per share		$	0.8182
Price per share on December 31, 2021		$	13.00

1. Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places.

   Ratio	Barry	Industry Average
   Current		2.42
   Quick		1.64
   Days sales outstandinga	days	37	days
   Inventory turnover		7.95
   Total assets turnover		2.16
   Profit margin	%	1.72	%
   ROA	%	3.73	%
   ROE	%	9.09	%
   ROIC	%	8.00	%
   TIE		2.57
   Debt/Total capital	%	45.69	%
   M/B		5.30
   P/E		18.27
   EV/EBITDA		7.90

   ^aCalculation is based on a 365-day year.
2. Construct the DuPont equation for both Barry and the industry. Do not round intermediate calculations. Round your answers to two decimal places.

   	FIRM	INDUSTRY
   Profit margin	%	1.72%
   Total assets turnover		2.16
   Equity multiplier

3. Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis.
   1. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. Finally, it's market value ratios are also below industry averages. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
   2. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should loosen credit or apply a less stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
   3. The firm's days sales outstanding ratio is less than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit margin is lower than the industry average, its other profitability ratios are high compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
   4. The firm's days sales outstanding ratio is more than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection policy. The total assets turnover ratio is well above the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in an above average liquidity position and financial leverage is similar to others in the industry.
   5. The firm's days sales outstanding ratio is comparable to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry - net income should be higher given the amount of equity, assets, and invested capital. However, the company seems to be in a below average liquidity position and financial leverage is similar to others in the industry.
   -Select one
4. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2021. How would that information affect the validity of your ratio analysis? (Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.)
   1. If 2021 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2021 ratios will be misled, and a return to normal conditions in 2022 could hurt the firm's stock price.
   2. If 2021 represents a period of supernormal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors need only look at 2021 ratios to be well informed, and a return to normal conditions in 2022 could help the firm's stock price.
   3. If 2021 represents a period of normal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have little meaning. Potential investors who look only at 2021 ratios will be misled, and a continuation of normal conditions in 2022 could hurt the firm's stock price.
   4. If 2021 represents a period of normal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2021 ratios will be misled, and a return to supernormal conditions in 2022 could hurt the firm's stock price.
   5. If 2021 represents a period of supernormal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will have substantial meaning. Potential investors who look only at 2021 ratios will be well informed, and a return to normal conditions in 2022 could hurt the firm's stock price.
   -Select one