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Ratio Analysis, marketing homework help
Problem 4-23
Ratio Analysis
Data for Barry Computer Co. and its industry averages follow.
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Barry Computer Company: |
|||
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Balance Sheet as of December 31, 2015 (In Thousands) |
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|
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 |
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Long-term debt |
$256,500 |
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|
Net fixed assets |
292,500 |
Common equity |
361,000 |
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Total assets |
$947,500 |
Total liabilities and equity |
$648,000 |
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Barry Computer Company: |
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|
Sales |
$1,607,500 |
|
|
Cost of goods sold |
||
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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.
AUTHENIC WORK, PLEASE USE OWN WORK
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