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need answered ASAP! Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at pac, so the market value of
need answered ASAP!
Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at pac, so the market value of its debt equals its book value. Since dollars are in thousands, number of shares are shown in thousands too. a. Calculate the indicated ratios for Barry. Do not round intermediate calculatione a ound your answers to two decimal places. * Calculation is based on a 365-day year. b. Construct the Dupont equation for both Barry and the industry. Do not round intermediate caiculations. Round your answers to two decimal places. c. 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 tumover ratio is well below the indusery average so sales sheuld 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 give 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 liguldity position and financial leverage is similar to others in the industry. II. 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 tumover 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 lleuidity position and fnancial ieverage is similar to others in the industry. 1it. The firm's days sales outstanding ratio is less than the industry averege, indicating that the firm should vighten credit or enforce a more stringent collection policy. The total assets turnover ratio is weil below the industry average so sales should be increased, assets decreased, or both. While the company's proft 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 similiar to others in the industry. IV. 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 - not 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. V. The firm's days sales outstanding ratio is comparabie to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent collection policy. The total assets tumover rato is well below the industry averoge so soles should be increased, assets increased, or both. While the company's profit margin is higher than the industry average, its other proftability ratios are low compared to the industry, - net income should be higher given the amount of equity, assets, and invested capital. Howevec, the company seems to be in a below average llquidity position and financial leverage is similar to others in the industry. d. 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 supemermal growth tor 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. II. 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 lttie meaning. Potential investors whe look only at 2019 ratios will be misled, and a return to normal conditions in 2020 could hurt the firms stock price. 1i. If 2019 represents a peried of supernomal growth for the firm, ratios based on this year will be accurate and a comparison between them and industry averaget will have substantial meaning. Potential investors need only look at 2019 ratios to be weil informed, and a return to normal conditions in 2020 could help the firm's stock price. IV, 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 litte 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. V. 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 supernormat conditions in 2020 could hurt the firm's stock price Step by Step Solution
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