Question

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, 2018 (In Thousands)
Cash	$228,975		Accounts payable	$183,180
Receivables	519,010		Other current liabilities	244,240
Inventories	427,420		Notes payable to bank	183,180
Total current assets	$1,175,405		Total current liabilities	$610,600
			Long-term debt	$457,950
Net fixed assets	351,095		Common equity (45,795 shares)	457,950
Total assets	$1,526,500		Total liabilities and equity	$1,526,500

Barry Computer Company: Income Statement for Year Ended December 31, 2018 (In Thousands)
Sales			$2,150,000
Cost of goods sold
Materials	$1,032,000
Labor	516,000
Heat, light, and power	107,500
Indirect labor	150,500
Depreciation	64,500		1,870,500

Gross profit	$	279,500
Selling expenses		129,000
General and administrative expenses	$	21,500
Earnings before interest and taxes (EBIT)	$	129,000
Interest expense		41,216
Earnings before taxes (EBT)	$	87,784
Federal and state income taxes (40%)		35,114
Net income	$	52,670
Earnings per share	$	1.15013
Price per share on December 31, 2018	$	10.00

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

   Ratio	Barry	Industry Average
   Current	x	1.86x
   Quick	x	1.26x
   Days sales outstandinga	days	41.17 days
   Inventory turnover	x	5.49x
   Total assets turnover	x	1.67x
   Profit margin	%	2.29%
   ROA	%	3.83%
   ROE	%	12.78%
   ROIC	%	7.60%
   TIE	x	3.23x
   Debt/Total capital	%	59.23%
   M/B	%	4.00%
   P/E	%	11.01%
   EV/EBITDA	%	7.03%

   
   ^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	%	2.29%
   Total assets turnover	x	1.67x
   Equity multiplier	x

Answer 1

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

Ratio	Barry	Industry Average
Current = currunt asset / currunt liability	1,175,405 / 610,600 = 1.925x	1.86x
Quick = quick asset(cash + recievables) / currunt liability	(228,975 + 519,010) / 610600 = 1.225x	1.26x
Days sales outstanding = 365 /inventory turn over	365 / 2.41 = 151.45days	41.17 days
Inventory turnover = cost of good sold / inventory	1,032,000 / 427,420 =2.41x	5.49x
Total assets turnover = sales / total asset	1,032,000 / 1,526,500 = 0.676x	1.67x
Profit margin = net income / sales	52,670 / 1032000 = 0.051 or 5.1%	2.29%
ROA = net income / total asset	52670 / 1526500 = 0.034 or 3.45%	3.83%
ROE = net income / equity	52670 / 457,950 = 0.115 or 11.5%	12.78%
ROIC = net income / invested capital	52670 / 1,526,500 = 0.034 or 3.45%	7.60%
TIE = EBIT / interest	129000 / 41,216 = 3.12x	3.23x
Debt/Total capital	(610600 + 457,950) / 1,526,500 = 0.7 or 70%	59.23%
M/B = market value per share / book value per share Book value per share = total book value equity / outstanding shares = 457,950 / 45795 = 10	10 /10 =1	4.00%
P/E = market price / EPS	10 / 1.15013 = 8.69	11.01%
EV/EBITDA EV = Common Shares + Preferred Shares + Market Value of Debt + Minority Interest – Cash and Equivalents = 457,950 + 457,950 - 228,975 = 686925 EBITDA = EBIT + depreaciation = 129,000 + 64500 = 193500	686925 / 193500 =3.55	7.03%

.

b Construct the DuPont equation for both Barry and the industry. Round your answers to two decimal places.

	FIRM	INDUSTRY
Profit margin	5.1%	2.29%
Total assets turnover	0.676x	1.67x
Equity multiplier = asset / equity 1,526,500 / 457,950	3.34x

Dupont,- ROE =  Profit margin * Total assets turnover * Equity multiplier

ROE = 0.051 * 0.676 * 3.34 = 0.1151 or 11.51%