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,

the number of shares is shown in thousands too.

Barry Computer Company:

Barry Computer Company:

Income Statement for Year Ended December $31,2021($in thousands$)$

Sales

$$2,950,000$

Cost of goods sold

a$.$ Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places.

${?}^a$ Calculation is based on a $365-$day year.

b$.$ Construct the DuPont equation for both Barry and the industry. Do not round intermediate calculations. Round your answers to two decimal places.

FIRM

Profit margin

Total assets turnover

Equity multiplier

INDUSTRY

$2\mathrm{.}57\%$

$1\mathrm{.}56$

c$.$ Select the correct option based on Barry's strengths and weaknesses as revealed by your analysis.

I. The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should tighten credit or enforce a more

stringent collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the

company's profit margin is higher than the industry average, its other profitability ratios are low compared to the industry $-$ net income should be higher given

the amount of equity, assets, and invested capital. Finally, it's market value ratios are also below industry averages. However, the company seems to be in an

average liquidity position and financial leverage is similar to others in the industry.

II$.$ The firm's days sales outstanding ratio is more than twice as long as the industry average, indicating that the firm should loosen credit or apply a less stringent

collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's

profit margin is higher than the industry average, its other profitability ratios are low compared to the industry $-$ net income should be higher given the amount

of equity, assets, and invested capital. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the

industry.

III. The firm's days sales outstanding ratio is less than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection

policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets decreased, or both. While the company's profit

margin is lower than the industry average, its other profitability ratios are high compared to the industry $-$ net income should be higher given the amount of

equity, assets, and invested capital. However, the company seems to be in an average liquidity position and financial leverage is similar to others in the industry

IV$.$ The firm's days sales outstanding ratio is more than the industry average, indicating that the firm should tighten credit or enforce a more stringent collection

policy. The total assets turnover ratio is well above the industry average so sales should be increased, assets increased, or both. While the company's profit

margin is higher than the industry average, its other profitability ratios are low compared to the industry $-$ net income should be higher given the amount of

equity, assets, and invested capital. However, the company seems to be in an above average liquidity position and financial leverage is similar to others in the

industry.

V$.$ The firm's days sales outstanding ratio is comparable to the industry average, indicating that the firm should neither tighten credit nor enforce a more stringent

collection policy. The total assets turnover ratio is well below the industry average so sales should be increased, assets increased, or both. While the company's

profit margin is higher than the industry average, its other profitability ratios are low compared to the industry $-$ net income should be higher given the amount

of equity, assets, and invested capital. However, the company seems to be in a below average liquidity position and financial leverage is similar to others in the

industry.

d$.$ Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during $2021.$ How would that information affect the validity of you

ratio analysis? $($Hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.$)$

I. If $2021$ represents a period of normal growth for the firm, ratios based on this year will be distorted and a comparison between them and industry averages will

have little meaning. Potential investors who look only at $2021$ ratios will be misled, and a continuation of normal conditions in $2022$ could hurt the firm'