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.)
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.