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RATIO ANALYSIS Data for Barry Computer Co. and its industry averages follow. Barry Computer Company: Balance...

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 $143,100 Accounts payable $171,720
Receivables 372,060 Other current liabilities 128,790
Inventories 386,370 Notes payable to bank 85,860
   Total current assets $901,530    Total current liabilities $386,370
Long-term debt $372,060
Net fixed assets 529,470 Common equity 672,570
Total assets $1,431,000 Total liabilities and equity $1,431,000
Barry Computer Company:
Income Statement for Year Ended December 31, 2016 (In Thousands)
Sales $2,650,000
Cost of goods sold
   Materials $1,086,500
   Labor 662,500
   Heat, light, and power 79,500
   Indirect labor 265,000
   Depreciation 79,500 2,173,000
Gross profit $   477,000
Selling expenses 291,500
General and administrative expenses 79,500
   Earnings before interest and taxes (EBIT) $     106,000
Interest expense 40,927
   Earnings before taxes (EBT) $     65,073
Federal and state income taxes (40%) 26,029
Net income $     39,044
  1. Calculate the indicated ratios for Barry. Round your answers to two decimal places.
    Ratio Barry              Industry Average
    Current x 2.28x
    Quick x 1.36x
    Days sales outstandinga days 24.40 days
    Inventory turnover x 7.06x
    Total assets turnover x 2.05x
    Profit margin % 1.40%
    ROA % 2.87%
    ROE % 6.18%
    ROIC % 7.00%
    TIE x 2.54x
    Debt/Total capital % 39.21%

    aCalculation is based on a 365-day year.
  2. Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.
    FIRM INDUSTRY
    Profit margin % 1.40%
    Total assets turnover x 2.05x
    Equity multiplier x x

Solutions

Expert Solution

a] Ratio Barry              Industry Average
Current 2.33 2.28x
Quick 1.33 1.36x
Days sales outstandinga 51.25 24.40 days
Inventory turnover 5.62 7.06x
Total assets turnover 1.85 2.05x
Profit margin 1.47% 1.40%
ROA 2.73% 2.87%
ROE 5.81% 6.18%
ROIC 5.63% 7.00%
TIE 2.59 2.54x
Debt/Total capital 53.00% 39.21%
b. Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.
FIRM INDUSTRY
Profit margin 1.47% 1.40%
Total assets turnover 1.85 2.05x
Equity multiplier 2.13 1.65
ROE Profit margin*Total assets turnover*Equity multiplier 5.81% 4.74%
[The ROE calculated in the first table seems to be wrong] [or one of the component ratios are wrong]

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