eBook 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, number of shares are shown in thousands too Barry Computer Company Balance Sheet as of December 31, 2019 (In Thousands) Cash $ 140,070 Accounts payable $ 140,070 Receivables 250,125 Other current liabilities 130,065 Inventories 230,115 Notes payable to bank 60,030 Total current assets $ 620,310 Total current liabilities $ 330,165 Long term debt 200,100 Net fixed assets 380,190 Common equity (47,023 5 shares) 470,235 Total assets $ 1,000,500 Total liabilities and equity $ 1,000,500 Barry Computer Company Income Statement for Year Ended December 31, 2019 (In Thousands) Sales $ 1,450,000 Cost of goods sold Materials $594,500 Labor 420,500 Heat, light, and power 87,000 Indirect labor 116,000 Depreciation 58,000 1,276,000 Gross profit $ 174,000 Selling expenses 72,500 General and administrative expenses 29,000 Earnings before interest and taxes (EBIT) $ 72,500 Interest expense 22,011 Earnings before taxes (EBT) $ 50,489 Federal and state income taxes (25 ) 12,622 Net income $ 37,867 Earnings per share $ 0 8053 Price per share on December 31, 2019 $ 13 00 Calculate the indicated ratios for Barry Do not round intermediate calculations Round your answers to two decimal places Ratio Barry Industry Average Current 1 89 Quick 1 13 Days sales outstanding a days 29 days Inventory turnover 6 88 Total assets turnover 1 72 Profit margin 2 44 ROA 4 21 ROE 8 95 ROIC 8 00 TIE 3 26 Debt Total capital 34 32 M B 5 30 P E 19 01 EV EBITDA 8 60 a Calculation is based on a 365 day year 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 2 44 Total assets turnover 1 72 Equity multiplier Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis 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 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 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 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 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 Select IIIIIIIVVItem 19 Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2019 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 ) If 2019 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 2019 ratios will be misled, and a return to supernormal conditions in 2020 could hurt the firm's stock price If 2019 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 2019 ratios will be well informed, and a return to normal conditions in 2020 could hurt the firm's stock price If 2019 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 2019 ratios will be misled, and a return to normal conditions in 2020 could hurt the firm's stock price If 2019 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 2019 ratios to be well informed, and a return to normal conditions in 2020 could help the firm's stock price If 2019 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 2019 ratios will be misled, and a continuation of normal conditions in 2020 could hurt the firm's stock price

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eBook 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

eBook

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, number of shares are shown in thousands too.

Barry Computer Company:
Balance Sheet as of December 31, 2019 (In Thousands)

Cash	$	140,070	Accounts payable	$	140,070
Receivables		250,125	Other current liabilities		130,065
Inventories		230,115	Notes payable to bank		60,030
Total current assets	$	620,310	Total current liabilities	$	330,165
			Long-term debt		200,100
Net fixed assets		380,190	Common equity (47,023.5 shares)		470,235
Total assets	$	1,000,500	Total liabilities and equity	$	1,000,500

Barry Computer Company: Income Statement for Year Ended December 31, 2019 (In Thousands)

Sales		$	1,450,000
Cost of goods sold
Materials	$594,500
Labor	420,500
Heat, light, and power	87,000
Indirect labor	116,000
Depreciation	58,000		1,276,000

Gross profit	$	174,000
Selling expenses		72,500
General and administrative expenses		29,000
Earnings before interest and taxes (EBIT)	$	72,500
Interest expense		22,011
Earnings before taxes (EBT)	$	50,489
Federal and state income taxes (25%)		12,622
Net income	$	37,867
Earnings per share	$	0.8053
Price per share on December 31, 2019	$	13.00

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

Ratio	Barry	Industry Average
Current		1.89
Quick		1.13
Days sales outstanding^a	days	29	days
Inventory turnover		6.88
Total assets turnover		1.72
Profit margin	%	2.44	%
ROA	%	4.21	%
ROE	%	8.95	%
ROIC	%	8.00	%
TIE		3.26
Debt/Total capital	%	34.32	%
M/B		5.30
P/E		19.01
EV/EBITDA		8.60

^aCalculation is based on a 365-day year.

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 % 2.44%

Total assets turnover 1.72

Equity multiplier
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 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.
2. 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.
3. 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.
4. 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.
5. 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.
-Select-IIIIIIIVVItem 19
Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2019. 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 2019 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 2019 ratios will be misled, and a return to supernormal conditions in 2020 could hurt the firm's stock price.
2. If 2019 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 2019 ratios will be well informed, and a return to normal conditions in 2020 could hurt the firm's stock price.
3. If 2019 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 2019 ratios will be misled, and a return to normal conditions in 2020 could hurt the firm's stock price.
4. If 2019 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 2019 ratios to be well informed, and a return to normal conditions in 2020 could help the firm's stock price.
5. If 2019 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 2019 ratios will be misled, and a continuation of normal conditions in 2020 could hurt the firm's stock price.