Ratio Analysis for Barry Computer Company

Data for Barry Computer Company and its industry averages follow:

A. Calculate the indicated ratios for Barry.

B. Construct and extend DuPont evaluation for both Barry and the industry.

C. Outline Barry's strengths and weaknesses as revealed by your analysis.

D. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2004. How would that information affect the validity of your ratio analysis? (hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.)

Barry Computer Company: Balance Sheet as of December 31, 2003 (In Thousands)

Cash $77,500 Accounts payable $129,000
Receivables 336,000 Notes payable 84,000
Inventories 241,500 Other current liabilities 117,000
Total Cash Assets 655,000 Total current liabilities 330,000
Net fixed assets 292,500 Long-term debt 256,500
Common equity 361,000
Total assets $947,500 Total liabilities and equity 947,500

Barry Computer Company Income Statement for year ended December 31, 2004 (in Thousands)

Sales $1,607,500
Costs of goods sold 1,392,500
Selling, general, and administrative expenses 145,000
Earnings before interest and taxes (EBIT) $70,000
Interest expense 24,500
Earning before taxes (EBT) $45,500
Federal and state incomes taxes (40%) 18,200
Net Income $27,300

A. Calculate the indicated ratios for Barry.
B. Construct and extend DuPont evaluation for both Barry and the industry.
C. Outline Barry's strengths and weaknesses as revealed by your analysis.
D. Suppose Barry had doubled its sales as well as its inventories, accounts receivable, and common equity during 2004. How would that information affect the validity of your ratio analysis? (hint: Think about averages and the effects of rapid growth on ratios if averages are not used. No calculations are needed.)