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, 2019 (InThousands)
Cash	$	199,125		Accounts payable	$	287,625
Receivables		862,875		Other current liabilities		265,500
Inventories		508,875		Notes payable to bank		199,125
Total current assets	$	1,570,875		Total current liabilities	$	752,250
				Long-term debt		508,875
Net fixed assets		641,625		Common equity (95,137.5 shares)		951,375
Total assets	$	2,212,500		Total liabilities and equity	$	2,212,500

Barry Computer Company: Income Statement for Year Ended December 31, 2019 (InThousands)
Sales			$	2,950,000
Cost of goods sold
Materials	$1,327,500
Labor	619,500
Heat, light, and power	206,500
Indirect labor	265,500
Depreciation	88,500			2,507,500

Gross profit		$	442,500
Selling expenses			236,000
General and administrative expenses			59,000
Earnings before interest and taxes(EBIT)		$	147,500
Interest expense			50,888
Earnings before taxes (EBT)		$	96,612
Federal and state income taxes (25%)			24,153
Net income		$	72,459
Earnings per share		$	0.7616
Price per share on December 31, 2019		$	13.00

1. Calculate the indicated ratios for Barry. Do not roundintermediate calculations. Round your answers to two decimalplaces.

   Ratio	Barry	Industry Average
   Current	×	2.12	×
   Quick	×	1.38	×
   Days sales outstandinga	days	50	days
   Inventory turnover	×	6.33	×
   Total assets turnover	×	1.50	×
   Profit margin	%	2.30	%
   ROA	%	3.45	%
   ROE	%	8.10	%
   ROIC	%	7.10	%
   TIE	×	3.00	×
   Debt/Total capital	%	42.07	%
   M/B		4.30
   P/E		19.09
   EV/EBITDA		9.93

   
   ^aCalculation is based on a 365-day year.
   
2. Construct the DuPont equation for both Barry and the industry.Do not round intermediate calculations. Round your answers to twodecimal places.

   	FIRM	INDUSTRY
   Profit margin	%	2.30%
   Total assets turnover	×	1.50×
   Equity multiplier	×	×

3. Select the correct option based on Barry's strengths andweaknesses as revealed by your analysis.
   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.
   -Select-IIIIIIIVVItem 19
4. Suppose Barry had doubled its sales as well as its inventories,accounts receivable, and common equity during 2019. 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.)
   1. If 2019 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 2019 ratios will be misled,and a continuation of normal conditions in 2020 could hurt thefirm's stock price.
   2. If 2019 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 2019 ratios will be misled, and a returnto supernormal conditions in 2020 could hurt the firm's stockprice.
   3. If 2019 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 2019 ratios will be wellinformed, and a return to normal conditions in 2020 could hurt thefirm's stock price.
   4. If 2019 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 2019 ratios will be misled,and a return to normal conditions in 2020 could hurt the firm'sstock price.
   5. If 2019 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 2019 ratios to be well informed, and areturn to normal conditions in 2020 could help the firm's stockprice.