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 $ 87,615 Accounts payable $ 87,615 Receivables 302,670 Other current liabilities 111,510 Inventories 215,055 Notes payable to bank 55,755 Total current assets $605,340 Total current liabilities $254,880 Long-term debt 215,055 Net fixed assets 191,160 Common equity (32,656.5 shares) 326,565 Total assets $796,500 Total liabilities and equity $796,500 Sales Barry Computer Company: Income Statement for Year Ended December 31, 2019 (In Thousands) $1,350,000 Cost of goods sold Materials $567,000 Labor 391,500 Heat, light, and power 94,500 Indirect labor 81,000 Depreciation 54,000 1,188,000 Gross profit $ 162,000 Selling expenses 94,500 General and administrative expenses 13,500 Earnings before interest and taxes (EBIT) $ 54,000 Interest expense 23,656 Earnings before taxes (EBT) $ 30,344 Federal and state income taxes (25%) 7,586 Net income $ 22,758 Earnings per share $ 0.6969 Price per share on December 31, 2019 $ 10.00 x X a. Calculate the indicated ratios for Barry. Do not round intermediate calculations. Round your answers to two decimal places. Ratio Barry Industry Average Current X 2.39% Quick 1.56 x Days sales outstanding days 38 days Inventory turnover 6.59x % Total assets turnover 1.91 x Profit margin % 1.58% ROA % 3.01% ROE % 7.74% ROIC % 7.10% TIE 2.19x Debt/Total capital % 46.83% M/B 4.00 P/E 17.28 EV/EBITDA 6.94 Calculation is based on a 365-day year. b. Construct the DuPont equation for both Barry and the industry. Do not round intermediate calculations. Round your answers to two decimal places. FIRM INDUSTRY Profit margin % 1.58% Total assets turnover 1.91x Equity multiplier х X X

Answer 1

1. Current Ratio = Current Assets / Current liabilities = 605340 / 254880 = 2.375 times

2. Quick Ratio = Quick Assets (Current assets - Inventories) / Current liabilities = (605340-215055)/ 254880= 1.53125 times

3. Days sales outstanding = (Average Accounts Receivable / Total credit sales)*No. of days = (302670 / 13,50,000)*365 = 81.833 days

4. Inventory Turnover Ratio = Cost of goods sold / Average Inventory =11,88,000/215055 = 5.524 times

5. Total assets turnover ratio = Net sales / Total assets = 13,50,000 / 796500 = 1.69 times

6. Profit margin = Net Income / Net sales = 22758 / 13,50,000 = 1.685 %

7. ROA = Net income / Average Total assets = 22758 / 796500 = 2.85 %

8. ROE = Net income / Shareholders' Equity = 22758 / 326565 = 6.96 %

9. Return on Invested Capital = Net Operating Profit after tax / Total Invested Capital (Debt+Equity) = 22758 / (326565+215055) = 4.20%

10. Times Interest Earned Ratio (TIE) = EBIT / Interest expense = 54,000 / 23656 = 2.28 times

11. Debt/Total Capital = Debt/(Debt + Equity) = 215055 / (326565+215055) = 39.70 %

12. Market to Book Ratio (MB) = Total Market capitalization / Book value = No. of shares * MPS / Book Value = (32656.5*10) / 326565 = 1 times

13. PE Ratio = MPS/EPS = 10/0.6969 = 14.34 times

14 Enterprise Value = Market Capitalization + Total value of Debt - Cash & Cash Equivalents = (32656.5*10) + (254880+215055) - 111510 = $ 684990

EBITDA = EBIT + Depreciation = 54,000 + 54000 = 108000 $

Hence EV/EBITDA = 684990/108000 = 6.34 times