Click here to read the eBook: Ratio Analysis RATIO ANALYSIS Data for Barry Compu

Question

Click here to read the eBook: Ratio Analysis RATIO ANALYSIS Data for Barry Computer Co. and its industry averages follow. Batry Computer Company: Balance Sheet as of December 31, 2016 (In Thousands) Accounts payable Other current liabilities Notes payable to bank $92,160 276,480 192,000 $560,640 $130,560 84,480 38,400 $253,440 $222,720 291,840 $768,000 Cash Receivables Inventories Total current liabilities Long-term debt Common equity Total liabilities and equity Total current assets Net fixed assets 207,360 Total assets $768,000 D Type here to search

Explanation / Answer

a. Current ratio = CA/CL

= 560,640/253,440

= 2.21

Quick ratio = Quick assets/Current liabilities

= Cash + receivables / CL

= 368,640 / 253,440

= 1.45

DSO = AR/Avg. sales per day

= 276,480 / 1,200,000/365

= 84 days

Inventory turnover = COGS/Avg. Inventory

= 972,000 / 192,000

= 5.06 times

Total assets turonver = Sales/TA

= 1,200,000 / 768,000

= 1.5625

Profit margin (assuming net profit only) = net profit / sales

= 18,109 / 1,200,000

= 1.51%

ROA = Net profit / TA

= 18,109 / 768,000

= 2.36%

ROE = 18,109 / 291,840

= 6.21%

Invested capital = debt + equity

= 222,720 + 291,840

= $514,560

ROIC = 18,109 / 514,560

= 3.52%

TIE = EBIT/I

= 48,000/17,818

= 2.69%

Debt / total capital = 222,720 / 514,560

= 43.28%

b. Du pont equation for Barry:

PM x TA turnover x equity multiplier = 1.51% x 1.5625 x 768,000/291,840 = 6.21

Suffiecient data is not available to calculate for industry.

c. 1st option is correct.

d. 1st option is correct. Industry is not going through a supernatural growth period. Hence the comparison will be pointless and 2017 predictions can't be based on 2016's information.

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