Question Details x.øi5culate the indicated ratios for Barry.Construct the extend

Question

Question Details
x.øi5culate the indicated ratios for Barry.Construct the extended Du Pont equation for Barry and the industry.
Outline Barry's strengths and weaknesses as revealed by your analysys.
Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity in 2005. How would that information affect the validity of your ratio analysis?
Barry Computer Company: Balance Sheet as of December 31, 2005. (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 assests $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 $947,500

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
Heat,light,& power 68,000
Indirect labor 113,000
Depreciation 41,500 1,393,500
Gross profit õs;x.øi5sp; $ 215,000
Selling expenses 115,000
General & admin. expenses 30,000
Earnings before interest and taxex (EBIT) $ 70,000
Interest expense 24,500
Earnings before taxes (EBT) $ 45,500
Federal & State Income taxes (40%) 18,200
Net Income $ 27,300
Ratio Barry Industry Avg.
Current ____ 2.0x
Quick ____ 1.3x
Days sales outstanding _____ 35 days
Inventory turnover _____ 6.7x
Total assets turnover _____ 3.0x
Net profit margin _____ 1.2x
ROA _____ 3.6%
ROE _____ 9.0%
Total debt/total assets _____ 60.0%
*365 day

Explanation / Answer

Total Assets Turnover Ratio = 1.69 times Income Statement Sales $1,607,500 Cost of Goods Sold: Materials $717,000 Labor $453,000 Heat, Light & Power $68,000 Indirect Labor $113,000 $1,351,000 Gross Profit $256,500 Selling expenses $115,000 General & Admin Expenses $30,000 $145,000 Earnings Before Interst, Taxes and Depreciation (EBIT & D) $111,500 Less: Depreciation $41,500 EBIT $70,000 Less: Interest Expenses $24,500 EBIT $45,500 Less: Tax (40%) $18,200 Net Income $27,300 (1) Current Ratio = Current Assets / Current Liabilities Current Ratio = $655,000 / $330,000 Current Ratio = 1.98 (2) Quick Ratio = (Cash + Accounts Receivables) / Current Liabilities Quick Ratio = ($77,500 + $336,000) / $330,000 Quick Ratio = $413,500 / $330,000 Quick Ratio = 1.25 (3) Days Sales Outstanding = (Account's Receivables / Total Credit Sales ) * Number of Days Days Sales Outstanding = ($336,000 / $1,607,500) * 365 days Days Sales Outstanding = 76.29 days (4) Inventory Turnover Ratio = Sales / Inventory Inventory Turnover Ratio = $1,607,500 / $241,500 Inventory Turnover Ratio = 6.65 times (5) Total Assets Turnover Ratio = Revenue (Sales) / Total Assets Total Assets Turnover Ratio = $1,607,500 / $947,500

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