Data for Barry Computer Co. and its industry averages follow.

a. Calculate the indicated ratios for Barry.

b. Construct the extended Du Pont 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 2005. How would that information affect the validity of your ratio analysis?

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Barry Computer Company: Balance Sheet as of December 31, 2005 (In Thousands) $ 77,500 Accounts payable Notes payable Cash $129,000 Receivables 336,000 84,000 241,500 $655,000 Other current liabilities Inventories 117,000 $330,000 Total current liabilities Total current assets Long-term debt Common equity Total liabilities and equity 256,500 361,000 $947,500 Net fixed assets 292,500 $947,500 Total assets Barry Computer Company: Income Statement for Year Ended December 31, 2005 (In Thousands) Sales $1,607,500 Cost of goods sold Materials $717,000 Labor 453,000 68,000 113,000 41,500 Heat, light, and power Indirect labor Depreciation Gross profit Selling expenses General and administrative expenses 1,392,500 $ 215,000 115,000 30,000 $ 70,000 24,500 Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (40 percent) 45,500 18,200 27,300 Net income Ratio Barry Industry Average Current 2.0x Quick 1.3x Days sales outstanding 35 days 6.7x Inventory turnover Total assets turnover Net profit margin 3.0x 1.2% ROA 3.6% ROE 9.0% Total debt/total assets 60.0% * Calculation is based on a 365-day year.