Data for Barry Computer Co. and its industry averages follow.The firm's debt is priced at par, so the market value of its debtequals its book value. Since dollars are in thousands, number ofshares are shown in thousands too.

Barry Computer Company:
Balance Sheet as of December 31, 2018 (InThousands)
Cash	$99,000		Accounts payable	$153,000
Receivables	225,000		Other current liabilities	126,000
Inventories	270,000		Notes payable to bank	81,000
Total current assets	$594,000		Total current liabilities	$360,000
			Long-term debt	$216,000
Net fixed assets	306,000		Common equity (32,400 shares)	324,000
Total assets	$900,000		Total liabilities and equity	$900,000

Barry Computer Company: Income Statement for Year Ended December 31, 2018 (InThousands)
Sales			$1,200,000
Cost of goods sold
Materials	$564,000
Labor	276,000
Heat, light, and power	48,000
Indirect labor	84,000
Depreciation	60,000		1,032,000

Gross profit	$	168,000
Selling expenses		84,000
General and administrative expenses	$	24,000
Earnings before interest and taxes(EBIT)	$	60,000
Interest expense		25,920
Earnings before taxes (EBT)	$	34,080
Federal and state income taxes (40%)		13,632
Net income	$	20,448
Earnings per share	$	0.63111
Price per share on December 31, 2018	$	13.00

1. Calculate the indicated ratios for Barry. Round your answers totwo decimal places.

   Ratio	Barry	Industry Average
   Current	x	1.62x
   Quick	x	0.84x
   Days sales outstandinga	days	32.59 days
   Inventory turnover	x	4.58x
   Total assets turnover	x	1.47x
   Profit margin	%	1.62%
   ROA	%	2.39%
   ROE	%	6.71%
   ROIC	%	7.80%
   TIE	x	2.41x
   Debt/Total capital	%	47.23%
   M/B	%	5.30%
   P/E	%	23.35%
   EV/EBITDA	%	7.63%

   
   ^aCalculation is based on a 365-day year.
   
2. Construct the DuPont equation for both Barry and the industry.Round your answers to two decimal places.

   	FIRM	INDUSTRY
   Profit margin	%	1.62%
   Total assets turnover	x	1.47x
   Equity multiplier	x	x

3. Select the correct option based on Barry's strengths andweaknesses as revealed by your analysis.
   -Select-IIIIIIIVVItem 19
   1. The firm's days sales outstanding ratio is more than theindustry average, indicating that the firm should tighten credit orenforce a more stringent collection policy. The total assetsturnover ratio is well above the industry average so sales shouldbe increased, assets increased, or both. While the company's profitmargin is higher than the industry average, its other profitabilityratios are low compared to the industry - net income should behigher given the amount of equity, assets, and invested capital.However, the company seems to be in an above average liquidityposition and financial leverage is similar to others in theindustry.
   2. The firm's days sales outstanding ratio is comparable to theindustry average, indicating that the firm should neither tightencredit nor enforce a more stringent collection policy. The totalassets turnover ratio is well below the industry average so salesshould be increased, assets increased, or both. While the company'sprofit margin is higher than the industry average, its otherprofitability ratios are low compared to the industry - net incomeshould be higher given the amount of equity, assets, and investedcapital. However, the company seems to be in a below averageliquidity position and financial leverage is similar to others inthe industry.
   3. The firm's days sales outstanding ratio is more than twice aslong as the industry average, indicating that the firm shouldtighten credit or enforce a more stringent collection policy. Thetotal assets turnover ratio is well below the industry average sosales should be increased, assets decreased, or both. While thecompany's profit margin is higher than the industry average, itsother profitability ratios are low compared to the industry - netincome should be higher given the amount of equity, assets, andinvested capital. Finally, it's market value ratios are also belowindustry averages. However, the company seems to be in an averageliquidity position and financial leverage is similar to others inthe industry.
   4. The firm's days sales outstanding ratio is more than twice aslong as the industry average, indicating that the firm shouldloosen credit or apply a less stringent collection policy. Thetotal assets turnover ratio is well below the industry average sosales should be increased, assets increased, or both. While thecompany's profit margin is higher than the industry average, itsother profitability ratios are low compared to the industry - netincome should be higher given the amount of equity, assets, andinvested capital. However, the company seems to be in an averageliquidity position and financial leverage is similar to others inthe industry.
   5. The firm's days sales outstanding ratio is less than theindustry average, indicating that the firm should tighten credit orenforce a more stringent collection policy. The total assetsturnover ratio is well below the industry average so sales shouldbe increased, assets decreased, or both. While the company's profitmargin is lower than the industry average, its other profitabilityratios are high compared to the industry - net income should behigher given the amount of equity, assets, and invested capital.However, the company seems to be in an average liquidity positionand financial leverage is similar to others in the industry.
4. Suppose Barry had doubled its sales as well as its inventories,accounts receivable, and common equity during 2018. How would thatinformation affect the validity of your ratio analysis?(Hint: Think about averages and the effects of rapidgrowth on ratios if averages are not used. No calculations areneeded.)
   -Select-IIIIIIIVVItem 20
   1. If 2018 represents a period of supernormal growth for the firm,ratios based on this year will be distorted and a comparisonbetween them and industry averages will have little meaning.Potential investors who look only at 2018 ratios will be misled,and a return to normal conditions in 2019 could hurt the firm'sstock price.
   2. If 2018 represents a period of supernormal growth for the firm,ratios based on this year will be accurate and a comparison betweenthem and industry averages will have substantial meaning. Potentialinvestors need only look at 2018 ratios to be well informed, and areturn to normal conditions in 2019 could help the firm's stockprice.
   3. If 2018 represents a period of normal growth for the firm,ratios based on this year will be distorted and a comparisonbetween them and industry averages will have little meaning.Potential investors who look only at 2018 ratios will be misled,and a continuation of normal conditions in 2019 could hurt thefirm's stock price.
   4. If 2018 represents a period of normal growth for the firm,ratios based on this year will be accurate and a comparison betweenthem and industry averages will have substantial meaning. Potentialinvestors who look only at 2018 ratios will be misled, and a returnto supernormal conditions in 2019 could hurt the firm's stockprice.
   5. If 2018 represents a period of supernormal growth for the firm,ratios based on this year will be distorted and a comparisonbetween them and industry averages will have substantial meaning.Potential investors who look only at 2018 ratios will be wellinformed, and a return to normal conditions in 2019 could hurt thefirm's stock price.