1. Ratio analysis Data for Barry Computer Co. and its industry averages follow.

1. Calculate the indicated ratios for Barry.
2. Outline Barry’s strengths and weaknesses as revealed by your analysis, by indicating on each ratio, whether Barry is higher or lower than the industry average, and write is this good or bad.

Barry Computer Company Balance Sheet as of December 31, 2005 (in thousands)

Cash $ 0 Accounts payable $200,000

Receivables 200,000 Notes payable 100,000

Inventories 200,000 Other current liabilities 200.000

Total current assets 400,000 Total current liabilities 500,000

Long-term debt 400,000

Net fixed assets 600,000 Common equity 100.000

Total assets 1,000,000 Total liabilities and equity 1,000,000

Barry Computer Company: Income Statement for Year Ended December 31, 2005 (in Thousands)

Sales $1,000,000

Cost of goods sold

Materials 400,000

Labor 300,000

Heat, light, and power 50,000

Indirect labor 100,000

Depreciation 50,000 900,000

Gross profit 100,000

Selling expenses 60,000

General and administrative expenses 30,000

Earnings before interest and taxes (EBIT) 10,000

Interest expense 10,000

Earnings before taxes (EBT) 0

Federal and state income taxes (40 percent) 0

Net income 0

Higher or

Lower Good or Industry

Ratio Barry (><) Bad Average

Current _____ _____ _____ 2.0X

Quick _____ _____ _____ 1.3X

Days sales outstanding _____ _____ _____ 35 days

Inventory turnover _____ _____ _____ 6.7X

Total assets turnover _____ _____ _____ 3.0X

Net profit margin _____ _____ _____ 1.2%

ROA _____ _____ _____ 3.6%

ROE _____ _____ _____ 9.0%

Total debt/total assets _____ _____ _____ 60%