4-23 RATIO ANALYSIS 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 dol- lars are in thousands, number of shares are shown in thousands too. a. Calculate the indicated ratios for Barry. b. Construct the DuPont equation for both Barry and the industry. c. Outline Barry's strengths and weaknesses as revealed by your analysis. d. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2018. 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.) Barry Computer Company: Balance Sheet as of December 31, 2018 (in Thousands) Cash $ 77,500 Accounts payable $129,000 Receivables 336,000 Other current liabilities 117,000 Inventories 241,500 Notes payable to bank 84,000 Total current assets $ 655,000 Total current liabilities $330,000 Long-term debt 256,500 Net fixed assets 292,500 Common equity (36,100 shares) 361,000 Total assets $ 947,500 Total liabilities and equity $947,500 Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 Cengage Learning All Rights Reserved. May not he copied, scanned, or duplicated, in whole or in purt. Due to clectronie rights, some thind parny content may he suppressed from the ellook andlor eChaptent) deemed that any suppeessed content does not materially aflect the overall learning experience. Cengage Leaning reserves the right to remove additinal content at any time if sabsequent rights restrictions require it. Chapter 4 Analysis of Financial Statements 141 Barry Computer Company: Income Statement for Year Ended December 31, 2018 (in Thousands) Sales $1,607,500 Cost of goods sold Materials $717,000 Labor 453,000 Heat, light, and power 68,000 Indirect labor 113,000 Depreciation 41,500 1,392,500 Gross profit 215,000 Selling expenses 115,000 General and administrative expenses 30,000 Earnings before interest and taxes (EBIT) $ 70,000 Interest expense 24,500 Earnings before taxes (EBT) 45,500 Federal and state income taxes (40%) 18,200 Net income 27,300 Earnings per share 0.75623 Price per share on December 31, 2018 $ 12.00 Ratio Barry Industry Average Current 2.0x Quick 1.3X Days sales outstanding 35 days Inventory turnover 6.7X Total assets turnover 3.0x Profit margin 1.2% ROA 3.6% ROE 9.0% ROIC 7.5% TIE 3.0x Debt/Total capital 47.0% M/B 4.22 P/E 17.86 EV/EBITDA 9.14 "Calculation is based on a 365-day year.