Balance Sheet as of December 31, 2011 (In Thousands) Accounts payable Notes paya

Question

Balance Sheet as of December 31, 2011 (In Thousands) Accounts payable Notes payable Other current liabilities Cash $150,000 570,000 405,000 $1,125,000 $180,000 165,000 135,000 $480,000 Receivables Total current assets Total current liabilities Long-term debt Common equity Total liabilities and equity $360,000 660,000 $1,500,000 Net fixed assets 375,000 Total assets $1,500,000 Barry Computer Company: Income Statement for Year Ended December 31, 2011 (In Thousands) Sales $3,000,000 Cost of goods sold Materials Labor Heat, light, and power Indirect labor Depreciation $1,230,000 870,000 120,000 180,000 150,000 $2,550,000 $450,000 270,000 60,000 $120,000 39,600 80,400 32,160 $48,240 Gross profit Selling expenses General and administrative expenses Earnings before interest and taxes (EBIT) Interest expense Earnings before taxes (EBT) Federal and state income taxes (40%) Net income a. Calculate the indicated ratios for Barry. Round your answers to two decimal places. Industry Average 2.23x 1.43x 32.41days 8.09x 2.38x 1.50% 3.57% Barry Ratio Current Quick Days sales outstanding" [ days Inventory turnover Total assets turnover Net profit margin ROA ROE Total debt/total assets 54.1 3% Calculation is based on a 365-day year

Explanation / Answer

b) Net Profit Margin = Net Income / Sales = 48,280 / 3,000,000 = 1.61%

Total asset turnover = Sales / Total Assets = 3,000,000 / 1,500,000 = 2.00x

Equity Multiplier = Total Assets / Equity = 1,500,000 / 660,000 = 2.27

Equity Multiplier (Industry) = ROE / (Net profit margin x Asset turnover) = 7.78% / (1.5% x 2.38) = 2.18

a) ROA = Net Profit Margin x Asset Turnover = 1.61% x 2 = 3.22%

ROE = ROA x Equity Multiplier = 3.22% x 2.27 = 7.31%

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