4-23 RATIO ANALYSIS Data for Barry Computer Co. and its industry averages follow. The firms 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. a. Calculate the indicated ratios for Barry. b. Construct the DuPont equation for both Barry and the industry. c. Outline Barrys 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 2018. 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, 2018 (in Thousands) Cash $ 77,500 Accounts payable $129,000 Receivables 336,000 Other current liabilities 117,000 Inventories 241,500 Notes payable to bank 84,000 Total current assets $ 655,000 Total current liabilities $330,000 Long-term debt 256,500 Net fixed assets 292,500 Common equity (36,100 shares) 361,000 Total assets $ 947,500 Total liabilities and equity $947,500 Barry Computer Company: Income Statement for Year Ended December 31, 2018 (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 Earnings per share $ 0.75623 Price per share on December 31, 2018 $ 12.00 Ratio Barry Industry Average Current _____ 2.03 Quick _____ 1.33 Days sales outstandinga _____ 35 days Inventory turnover _____ 6.73 Total assets turnover _____ 3.03 Profit margin _____ 1.2% ROA _____ 3.6% ROE _____ 9.0% ROIC _____ 7.5% TIE _____ 3.03 Debt/Total capital _____ 47.0% M/B _____ 4.22 P/E _____ 17.86 EV/EBITDA _____ 9.14 a Calculation is based on a 365-day year.