Question

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

Answer 1

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]