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 $ 129,870 Accounts payable $ 158,730 Receivables 476,190 Other current liabilities 173,160 Inventories 432,900 Notes payable to bank 158,730 Total current assets $ 1,038,960 Total current liabilities $ 490,620 Long-term debt 418,470 Net fixed assets 404,040 Common equity (53,391 shares) 533,910 Total assets $ 1,443,000 Total liabilities and equity $ 1,443,000 Barry Computer Company:Income Statement for Year Ended December 31, 2019 (In Thousands) Sales $ 1,950,000 Cost of goods sold Materials $897,000 Labor 585,000 Heat, light, and power 117,000 Indirect labor 97,500 Depreciation 39,000 1,735,500 Gross profit $ 214,500 Selling expenses 97,500 General and administrative expenses 19,500 Earnings before interest and taxes (EBIT) $ 97,500 Interest expense 29,293 Earnings before taxes (EBT) $ 68,207 Federal and state income taxes (25%) 17,052 Net income $ 51,155 Earnings per share $ 0.9581 Price per share on December 31, 2019 $ 11.00 Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places. Ratio Barry Industry Average Current × 2.08 × Quick × 1.29 × Days sales outstandinga days 42 days Inventory turnover × 4.73 × Total assets turnover × 1.61 × Profit margin % 2.45 % ROA % 3.94 % ROE % 10.65 % ROIC % 7.50 % TIE × 3.43 × Debt/Total capital % 53.45 % M/B 5.10 P/E 14.26 EV/EBITDA 9.92 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 % 2.45% Total assets turnover × 1.61× 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.

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 $ 129,870 Accounts payable $ 158,730 Receivables 476,190 Other current liabilities 173,160 Inventories 432,900 Notes payable to bank 158,730 Total current assets $ 1,038,960 Total current liabilities $ 490,620 Long-term debt 418,470 Net fixed assets 404,040 Common equity (53,391 shares) 533,910 Total assets $ 1,443,000 Total liabilities and equity $ 1,443,000 Barry Computer Company:Income Statement for Year Ended December 31, 2019 (In Thousands) Sales $ 1,950,000 Cost of goods sold Materials $897,000 Labor 585,000 Heat, light, and power 117,000 Indirect labor 97,500 Depreciation 39,000 1,735,500 Gross profit $ 214,500 Selling expenses 97,500 General and administrative expenses 19,500 Earnings before interest and taxes (EBIT) $ 97,500 Interest expense 29,293 Earnings before taxes (EBT) $ 68,207 Federal and state income taxes (25%) 17,052 Net income $ 51,155 Earnings per share $ 0.9581 Price per share on December 31, 2019 $ 11.00 Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places. Ratio Barry Industry Average Current × 2.08 × Quick × 1.29 × Days sales outstandinga days 42 days Inventory turnover × 4.73 × Total assets turnover × 1.61 × Profit margin % 2.45 % ROA % 3.94 % ROE % 10.65 % ROIC % 7.50 % TIE × 3.43 × Debt/Total capital % 53.45 % M/B 5.10 P/E 14.26 EV/EBITDA 9.92 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 % 2.45% Total assets turnover × 1.61× 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.

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Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

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

Cash	$	129,870	Accounts payable	$	158,730
Receivables		476,190	Other current liabilities		173,160
Inventories		432,900	Notes payable to bank		158,730
Total current assets	$	1,038,960	Total current liabilities	$	490,620
			Long-term debt		418,470
Net fixed assets		404,040	Common equity (53,391 shares)		533,910
Total assets	$	1,443,000	Total liabilities and equity	$	1,443,000

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

Sales		$	1,950,000
Cost of goods sold
Materials	$897,000
Labor	585,000
Heat, light, and power	117,000
Indirect labor	97,500
Depreciation	39,000		1,735,500

Gross profit	$	214,500
Selling expenses		97,500
General and administrative expenses		19,500
Earnings before interest and taxes (EBIT)	$	97,500
Interest expense		29,293
Earnings before taxes (EBT)	$	68,207
Federal and state income taxes (25%)		17,052
Net income	$	51,155
Earnings per share	$	0.9581
Price per share on December 31, 2019	$	11.00

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

Ratio	Barry	Industry Average
Current	×	2.08	×
Quick	×	1.29	×
Days sales outstanding^a	days	42	days
Inventory turnover	×	4.73	×
Total assets turnover	×	1.61	×
Profit margin	%	2.45	%
ROA	%	3.94	%
ROE	%	10.65	%
ROIC	%	7.50	%
TIE	×	3.43	×
Debt/Total capital	%	53.45	%
M/B		5.10
P/E		14.26
EV/EBITDA		9.92

^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 % 2.45%

Total assets turnover × 1.61×

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.

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	FIRM	INDUSTRY
Profit margin	%	2.45%
Total assets turnover	×	1.61×
Equity multiplier	×	×