Question

Data for Barry Computer Co. and its industry averages follow. The firm's debt is priced at par, so the market value of its debt equals its book value. Since dollars are in thousands, number of shares are shown in thousands too.

Barry Computer Company:
Balance Sheet as of December 31, 2019 (In Thousands)
Cash	$	68,640		Accounts payable	$	145,860
Receivables		231,660		Other current liabilities		68,640
Inventories		205,920		Notes payable to bank		77,220
Total current assets	$	506,220		Total current liabilities	$	291,720
				Long-term debt		197,340
Net fixed assets		351,780		Common equity (36,894 shares)		368,940
Total assets	$	858,000		Total liabilities and equity	$	858,000

Barry Computer Company: Income Statement for Year Ended December 31, 2019 (In Thousands)
Sales			$	1,300,000
Cost of goods sold
Materials	$559,000
Labor	338,000
Heat, light, and power	39,000
Indirect labor	78,000
Depreciation	65,000			1,079,000

Gross profit		$	221,000
Selling expenses			156,000
General and administrative expenses			13,000
Earnings before interest and taxes (EBIT)		$	52,000
Interest expense			15,787
Earnings before taxes (EBT)		$	36,213
Federal and state income taxes (25%)			9,053
Net income		$	27,160
Earnings per share		$	0.7362
Price per share on December 31, 2019		$	13.00

1. Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places.

   Ratio	Barry	Industry Average
   Current	×	1.75	×
   Quick	×	0.98	×
   Days sales outstandinga	days	30	days
   Inventory turnover	×	6.89	×
   Total assets turnover	×	1.71	×
   Profit margin	%	1.95	%
   ROA	%	3.33	%
   ROE	%	7.83	%
   ROIC	%	7.40	%
   TIE	×	3.26	×
   Debt/Total capital	%	41.37	%
   M/B		4.30
   P/E		20.06
   EV/EBITDA		8.62

   
   ^aCalculation is based on a 365-day year.

Answer 1

Calculation of the required ratios :

1. Current Ratio = Current Assets / Current liabilities = 506,220 / 291,720 = 1.73 times

2. Quick Ratio = Quick Assets (Current assets - Inventories) / Current liabilities = (506,220-205,920) / 291,720 = 1.03 times

3. Days sales outstanding = (Average Accounts Receivable / Total credit sales)*No. of days = (231,660/13,00,000) * 365 days = 65.04 days

4. Inventory Turnover Ratio = Cost of goods sold / Average Inventory = 10,79,000 / 205,920 = 5.24 times

5. Total assets turnover ratio = Net sales / Total assets = 13,00,000 / 858,000 = 1.52 times

6. Profit margin = Net Income / Net sales = 27,160 / 13,00,000 = 2.09 %

Note : Here we have used Net income for calculating profit margin. Students can give a note and use any other profit such as EBIT or Gross profit for calculation of the same.

7. ROA = Net income / Average Total assets = 27,160 / 858,000 = 3.17 %

8. ROE = Net income / Shareholders' Equity = 27,160 / 368,940 = 7.36 %

9. Return on Invested Capital = Net Operating Profit after tax / Total Invested Capital (Debt+Equity) = 27,160 / (368,940+197,340) = 4.8 %

10. Times Interest Earned Ratio (TIE) = EBIT / Interest expense = 52,000 / 15,787 = 3.29 times

11. Debt/Total Capital = Debt/(Debt + Equity) = 197,340 / (197,340+368,940) = 34.85 %

12. Market to Book Ratio (MB) = Total Market capitalization / Book value = No. of shares * MPS / Book Value = (36894*13) / 368940 = 1.3 times

13. PE Ratio = MPS/EPS = 13/0.7362 = 17.66 times

14. Calculation of EV/EBITDA Multiple :

Enterprise Value = Market Capitalization + Total value of Debt - Cash & Cash Equivalents = (36,894*13) + (291,720+197,340) - 68,640 = 900,042 $

EBITDA = EBIT + Depreciation = 52,000 + 65,000 = 117,000 $

Hence EV/EBITDA = 900,042/117,000 = 7.69 times