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 $140,600 Accounts payable $154,660 Receivables 534,280 Other current liabilities 182,780 Inventories 393,680 Notes payable to bank 112,480 Total current assets $1,068,560 Total current liabilities $449,920 Long term debt $281,200 Net fixed assets 337,440 Common equity 674,880 Total assets $1,406,000 Total liabilities and equity $1,406,000 Barry Computer Company Income Statement for Year Ended December 31, 2016 (In Thousands) Sales $1,900,000 Cost of goods sold Materials $798,000 Labor 513,000 Heat, light, and power 114,000 Indirect labor 95,000 Depreciation 57,000 1,577,000 Gross profit $ 323,000 Selling expenses 228,000 General and administrative expenses 19,000 Earnings before interest and taxes (EBIT) $ 76,000 Interest expense 30,932 Earnings before taxes (EBT) $ 45,068 Federal and state income taxes (40 ) 18,027 Net income $ 27,041 Calculate the indicated ratios for Barry Round your answers to two decimal places Ratio Barry Industry Average Current x 2 41x Quick x 1 55x Days sales outstanding a days 47 96 days Inventory turnover x 5 27x Total assets turnover x 1 52x Profit margin 1 33 ROA 2 02 ROE 4 26 ROIC 7 00 TIE x 2 49x Debt Total capital 37 94 a Calculation 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 1 33 Total assets turnover x 1 52x Equity multiplier x x Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis Select IIIIIIIVVItem 16 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 and financial leverage is similar to others in the industry 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 Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2016 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 ) Select IIIIIIIVVItem 17 If 2016 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 2016 ratios will be misled, and a continuation of normal conditions in 2017 could hurt the firm's stock price If 2016 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 2016 ratios will be misled, and a return to supernormal conditions in 2017 could hurt the firm's stock price If 2016 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 2016 ratios will be well informed, and a return to normal conditions in 2017 could hurt the firm's stock price If 2016 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 2016 ratios will be misled, and a return to normal conditions in 2017 could hurt the firm's stock price If 2016 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 2016 ratios to be well informed, and a return to normal conditions in 2017 could help the firm's stock price

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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

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	$140,600	Accounts payable	$154,660
Receivables	534,280	Other current liabilities	182,780
Inventories	393,680	Notes payable to bank	112,480
Total current assets	$1,068,560	Total current liabilities	$449,920
		Long-term debt	$281,200
Net fixed assets	337,440	Common equity	674,880
Total assets	$1,406,000	Total liabilities and equity	$1,406,000

Barry Computer Company: Income Statement for Year Ended December 31, 2016 (In Thousands)

Sales		$1,900,000
Cost of goods sold
Materials	$798,000
Labor	513,000
Heat, light, and power	114,000
Indirect labor	95,000
Depreciation	57,000	1,577,000

Gross profit		$ 323,000
Selling expenses		228,000
General and administrative expenses		19,000
Earnings before interest and taxes (EBIT)		$ 76,000
Interest expense		30,932
Earnings before taxes (EBT)		$ 45,068
Federal and state income taxes (40%)		18,027
Net income		$ 27,041

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

Ratio	Barry	Industry Average
Current	x	2.41x
Quick	x	1.55x
Days sales outstanding^a	days	47.96 days
Inventory turnover	x	5.27x
Total assets turnover	x	1.52x
Profit margin	%	1.33%
ROA	%	2.02%
ROE	%	4.26%
ROIC	%	7.00%
TIE	x	2.49x
Debt/Total capital	%	37.94%

^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 % 1.33%

Total assets turnover x 1.52x

Equity multiplier x x
Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis. -Select-IIIIIIIVVItem 16
1. 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.
2. 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.
3. 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 and financial leverage is similar to others in the industry.
4. 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.
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. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry.
Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2016. 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.) -Select-IIIIIIIVVItem 17
1. If 2016 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 2016 ratios will be misled, and a continuation of normal conditions in 2017 could hurt the firm's stock price.
2. If 2016 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 2016 ratios will be misled, and a return to supernormal conditions in 2017 could hurt the firm's stock price.
3. If 2016 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 2016 ratios will be well informed, and a return to normal conditions in 2017 could hurt the firm's stock price.
4. If 2016 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 2016 ratios will be misled, and a return to normal conditions in 2017 could hurt the firm's stock price.
5. If 2016 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 2016 ratios to be well informed, and a return to normal conditions in 2017 could help the firm's stock price.