Performance report on Barry Computer Company
Problem 4-23
Ratio Analysis
Data for Barry Computer Co. and its industry averages follow.
| Barry Computer Company: | |||
| Balance Sheet as of December 31, 2015 (In Thousands) | |||
| Cash | $77,500 | Accounts payable | $129,000 |
| Receivables | 336,000 | Other current liabilities | 117,000 |
| Inventories | 241,500 | Notes payable | 84,000 |
| Total current assets | $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 | Total liabilities and equity | $648,000 |
| Barry Computer Company: Income Statement for Year Ended December 31, 2015(In Thousands) |
||
| Sales | $1,607,500 | |
| Cost of goods sold | ||
| Materials | $717000 | |
| Labor | 453,000 | |
| Heat, light, and power | 68,000 | |
| Indirect labor | 113,000 | |
| Depreciation | 41,500 | $1,39,500 |
| Gross profit | $215,000 |
| Selling expenses | 115,000 |
| General and administrative expenses | 30,000 |
| Earnings before interest and taxes (EBIT) | $70,000 |
| Interest expense | 24,500 |
| Earnings before taxes (EBT) | 45,500 |
| Federal and state income taxes (40%) | 18,200 |
| Net income | $27,300 |
Calculate the indicated ratios for Barry. Round your answers to two decimal places.
| Ratio | Barry | Industry Average |
| Current | x | 2.0x |
| Quick | x | 1.3x |
| Days sales outstandinga | days | 35days |
| Inventory turnover | x | 6.7x |
| Total assets turnover | x | 3.0x |
| Profit margin | % | 1.2% |
| ROA | % | 3.6% |
| ROE | % | 9.0% |
| ROIC | % | 7.5% |
| TIE | x | 3.0x |
| Debt/Total capital | % | 47.0% |
Application: Using Ratio Analysis To Inform Organizational Decisions
The Assignment: Barry Computer Company
Prepare a performance report on Barry Computer Company. (Problem 4-23 on pages 131-132 of the course text provides a balance sheet and an income statement for the company.)
- Prepare your performance report to show calculations for the eleven ratios listed on page 131-132, as well as a comparison of your computed ratios with the listed industry averages.
- Write a short memo to your supervisor explaining your findings and your recommendations for improvement.
- Suggest some ways in which the company can plan to improve below industry average ratio performance.
- Explain why your recommendations would be effective.
- Be sure to list your computations in an appendix to your report.
General Guidance on Application Length:
The memo portion of this assignment will typically be 2 pages in length as a general expectation/estimate. You can show your calculations of financial ratios in a supplemental appendix to your memo. Refer to the rubric for the Week 2 Assignment for grading elements and criteria for the assignment. Your Instructor will use the rubric to assess your work.