RATIO ANALYSIS

Data for Barry Computer Co$.$ and its industry averages follow.

Barry Computer Company:

Balance Sheet as of December $31,2016($In Thousands$)$

Cash $$189,000$ Accounts payable $$204,750$

Receivables $567,000$ Other current liabilities $173,250$

Inventories $393,750$ Notes payable to bank $189,000$

Total current assets $$1,149,750$ Total current liabilities $$567,000$

Long$-$term debt $$378,000$

Net fixed assets $425,250$ Common equity $630,000$

Total assets $$1,575,000$ Total liabilities and equity $$1,575,000$

Barry Computer Company:

Income Statement for Year Ended December $31,2016($In Thousands$)$

Sales $$2,500,000$

Cost of goods sold

Materials $$1,050,000$

Labor $725,000$

Heat, light, and power $150,000$

Indirect labor $150,000$

Depreciation $125,0002,200,000$

Gross profit $ $300,000$

Selling expenses $200,000$

General and administrative expenses $25,000$

Earnings before interest and taxes $($EBIT$)$ $ $75,000$

Interest expense $45,360$

Earnings before taxes $($EBT$)$ $ $29,640$

Federal and state income taxes $(40\%)11,856$

Net income $ $17,784$

Calculate the indicated ratios for Barry. Round your answers to two decimal places.

Ratio Barry Industry Average

Current

x $2\mathrm{.}06$x

Quick

x $1\mathrm{.}27$x

Days sales outstandinga

days $38\mathrm{.}68$ days

Inventory turnover

x $6\mathrm{.}66$x

Total assets turnover

x $1\mathrm{.}79$x

Profit margin

$\%0\mathrm{.}66\%$

ROA

$\%1\mathrm{.}19\%$

ROE

$\%3\mathrm{.}14\%$

ROIC

$\%7\mathrm{.}20\%$

TIE

x $1\mathrm{.}75$x

Debt$/$Total capital

$\%48\mathrm{.}47\%$

aCalculation is based on a $365-$day year.

Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.

FIRM INDUSTRY

Profit margin

$\%0\mathrm{.}66\%$

Total assets turnover

x $1\mathrm{.}79$x

Equity multiplier

x

x

Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis.

$-$Select$-$

The firm's days sales outstanding 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. 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 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 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 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 an