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Category > Accounting Posted 19 Aug 2017 My Price 14.00

Barry Computer Co

4-22      RATIO ANALYSIS Data for Barry Computer Co. and its industry averages follow.

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 2008. 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, 2008 (In Thousands)

Cash

$  77,500

Accounts payable

$129,000

Receivables

336,000

Notes payable

84,000

Inventories

  241,500

Other current liabilities

  117,000

Total current assets

$655,000

Total current liabilities

$330,000

 

 

Long-term debt

256,500

Net fixed assets

  292,500

Common equity

  361,000

Total assets

$947,500

Total liabilities and equity

$947,500

 

 

Barry Computer Company: Income Statement for Year Ended December 31, 2008 (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

 

 

 

 

 

 

Ratio                                        Barry                 Industry Average

 

Current Quick

Days sales outstandinga                                           

Inventory turnover Total assets turnover Net profit margin ROA

ROE

Total debt/total assets                       

 

2.0X

1.3X

35 days 6.7X

3.0X

1.2%

3.6%

9.0%

60.0%

 

 

aCalculation is based on a 365-day year.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 19 Aug 2017 06:08 PM My Price 14.00

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