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 $ 249,900 Accounts payable $ 249,900 Receivables 678,300 Other current liabilities 232,050 Inventories 428,400 Notes payable to bank 89,250 Total current assets $ 1,356,600 Total current liabilities $ 571,200 Long term debt 357,000 Net fixed assets 428,400 Common equity (85,680 shares) 856,800 Total assets $ 1,785,000 Total liabilities and equity $ 1,785,000 Barry Computer Company Income Statement for Year Ended December 31, 2019 (In Thousands) Sales $ 2,550,000 Cost of goods sold Materials $1,020,000 Labor 714,000 Heat, light, and power 178,500 Indirect labor 102,000 Depreciation 51,000 2,065,500 Gross profit $ 484,500 Selling expenses 280,500 General and administrative expenses 76,500 Earnings before interest and taxes (EBIT) $ 127,500 Interest expense 35,700 Earnings before taxes (EBT) $ 91,800 Federal and state income taxes (25 ) 22,950 Net income $ 68,850 Earnings per share $ 0 8036 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 2 35 Quick 1 68 Days sales outstanding a days 45 days Inventory turnover 6 24 Total assets turnover 1 70 Profit margin 2 52 ROA 4 29 ROE 8 55 ROIC 7 50 TIE 3 48 Debt Total capital 35 35 M B 5 30 P E 18 38 EV EBITDA 9 96 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 52 Total assets turnover 1 70 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 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 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 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 Select IIIIIIIVVItem 20

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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	$	249,900	Accounts payable	$	249,900
Receivables		678,300	Other current liabilities		232,050
Inventories		428,400	Notes payable to bank		89,250
Total current assets	$	1,356,600	Total current liabilities	$	571,200
			Long-term debt		357,000
Net fixed assets		428,400	Common equity (85,680 shares)		856,800
Total assets	$	1,785,000	Total liabilities and equity	$	1,785,000

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

Sales		$	2,550,000
Cost of goods sold
Materials	$1,020,000
Labor	714,000
Heat, light, and power	178,500
Indirect labor	102,000
Depreciation	51,000		2,065,500

Gross profit	$	484,500
Selling expenses		280,500
General and administrative expenses		76,500
Earnings before interest and taxes (EBIT)	$	127,500
Interest expense		35,700
Earnings before taxes (EBT)	$	91,800
Federal and state income taxes (25%)		22,950
Net income	$	68,850
Earnings per share	$	0.8036
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		2.35
Quick		1.68
Days sales outstanding^a	days	45	days
Inventory turnover		6.24
Total assets turnover		1.70
Profit margin	%	2.52	%
ROA	%	4.29	%
ROE	%	8.55	%
ROIC	%	7.50	%
TIE		3.48
Debt/Total capital	%	35.35	%
M/B		5.30
P/E		18.38
EV/EBITDA		9.96

^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 % 2.52%

Total assets turnover 1.70

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 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.
2. 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.
3. 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.
4. 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.
5. 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.
-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.
-Select-IIIIIIIVVItem 20