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Prepare a performance report on Barry Computer Company 

 This must be in excel and word document to explain. 

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Prepare Your Performance Report To Show Calculations For The 14 Ratios As Well As A Comparison Of Your Computed Ratios With The Listed Industry Averages.
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  • Prepare your performance report to show calculations for the 14 ratios listed on page 141, 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.
  •  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. 

BALANCE SHEET ANALYSIS Complete the balance sheet and sales information using the following financial data:

Total assets turnover: 1.5×

Days sales outstanding: 36.5 daysa

Inventory turnover ratio: 5×

Fixed assets turnover: 3.0×

Current ratio: 2.0×

Gross profit margin on sales: (Sales − Cost of goods sold)/Sales = 25%

aCalculation is based on a 365-day year.

Balance Sheet
Cash___Current liabilities___
Accounts receivable___Long-term debt60,000
Inventories___Common stock
Fixed assets___Retained earnings97,500
Total assets$300,000Total liabilities and equity      
Sales___Cost of goods sold___

4-23 RATIO ANALYSIS 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.

a. Calculate the indicated ratios for Barry.

b. Construct the DuPont equation 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 2018. 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, 2018 (in Thousands)
Cash$ 77,500Accounts payable$129,000
Receivables336,000Other current liabilities117,000
Inventories241,500Notes payable to bank84,000
   Total current assets$ 655,000   Total current liabilities$330,000
Long-term debt256,500
Net fixed assets292,500Common equity (36,100 shares)361,000
Total assets$ 947,500Total liabilities and equity$947,500
Barry Computer Company: Income Statement for Year Ended December 31, 2018 (in Thousands)
Sales$1,607,500
Cost of goods sold
      Materials$717,000
      Labor453,000
      Heat, light, and power68,000
      Indirect labor113,000
      Depreciation41,5001,392,500
Gross profit$ 215,000
Selling expenses115,000
General and administrative expenses30,000
      Earnings before interest and taxes (EBIT)$ 70,000
Interest expense24,500
      Earnings before taxes (EBT)$ 45,500
Federal and state income taxes (40%)18,200
Net income$ 27,300
Earnings per share$ 0.75623
Price per share on December 31, 2018$ 12.00
RatioBarryIndustry Average
Current___2.0×
Quick___1.3×
Days sales outstandinga___35 days
Inventory turnover___6.7×
Total assets turnover___3.0×
Profit margin___1.2%
ROA___3.6%
ROE___9.0%
ROIC___7.5%
TIE___3.0×
Debt/Total capital___47.0%
M/B___4.22
P/E___17.86
EV/EBITDA___9.14
aCalculation is based on a 365-day year.

4-24 DuPONT ANALYSIS A firm has been experiencing low profitability in recent years. Perform an analysis of the firm’s financial position using the DuPont equation. The firm has no lease payments but has a $2 million sinking fund payment on its debt. The most recent industry average ratios and the firm’s financial statements are as follows:

Industry Average Ratios
Current ratioFixed assets turnover
Debt-to-capital ratio20%Total assets turnover
Times interest earnedProfit margin3%
EBITDA coverageReturn on total assets9%
Inventory turnover10×Return on common equity12.86%
Days sales outstandinga24 daysReturn on invested capital11.50%
aCalculation is based on a 365-day year.
Balance Sheet as of December 31, 2018 (Millions of Dollars)
Cash and equivalents$ 78Accounts payable$ 45
Accounts receivable66Other current liabilities11
Inventories159Notes payable29
   Total current assets$303   Total current liabilities$ 85
Long-term debt50
   Total liabilities$135
Gross fixed assets225Common stock114
   Less depreciation78Retained earnings201
Net fixed assets$147   Total stockholders’ equity$315
Total assets$450Total liabilities and equity$450
Income Statement for Year Ended December 31, 2018 (Millions of Dollars)
Net sales$795.0
Cost of goods sold660.0
   Gross profit$135.0
Selling expenses73.5
EBITDA$ 61.5
Depreciation expense12.0
   Earnings before interest and taxes (EBIT)$ 49.5
Interest expense4.5
   Earnings before taxes (EBT)$ 45.0
Taxes (40%)18.0
Net income$ 27.0

a. Calculate the ratios you think would be useful in this analysis.

b. Construct a DuPont equation, and compare the company’s ratios to the industry average ratios.

c. Do the balance sheet accounts or the income statement figures seem to be primarily responsible for the low profits?

d. Which specific accounts seem to be most out of line relative to other firms in the industry?

e. If the firm had a pronounced seasonal sales pattern or if it grew rapidly during the year, how might that affect the validity of your ratio analysis? How might you correct for such potential problems?

Comprehensive/Spreadsheet Problem

4-25 RATIO ANALYSIS The Corrigan Corporation’s 2017 and 2018 financial statements follow, along with some industry average ratios.

a. Assess Corrigan’s liquidity position, and determine how it compares with peers and how the liquidity position has changed over time.

b. Assess Corrigan’s asset management position, and determine how it compares with peers and how its asset management efficiency has changed over time.

c. Assess Corrigan’s debt management position, and determine how it compares with peers and how its debt management has changed over time.

d. Assess Corrigan’s profitability ratios, and determine how they compare with peers and how its profitability position has changed over time.

e. Assess Corrigan’s market value ratios, and determine how its valuation compares with peers and how it has changed over time. Assume the firm’s debt is priced at par, so the market value of its debt equals its book value.

Student uses Excel spreadsheet, and the formulas and calculations are correct.

Student provides a thorough and detailed analysis explaining the findings for areas that could be improved, analyzing which of the fourteen ratios indicate an area for improvement, and includes strong rationale to support each selection.

Student provides comprehensive and actionable recommendations for areas that could be improved, identifying areas of deficiency (ratios below industry standards listed), and provides evidence furnished through analysis of ratio components and illustrative examples from the course readings and/or outside research.

Student provides a thorough and detailed rationale to support each recommendation using illustrative examples from outside research, weekly course readings, and his/her professional experiences to validate why the proposed actions are potentially effective.

Writing exhibits strong evidence of thoughtful critical analysis and thinking; careful examination is made of assumptions and possible biases, with detailed supporting rationale. Writing synthesizes the classroom experiences and content; analyzes patterns or connections between theory and practice; and draws logical conclusions based on well-reasoned arguments. New questions may be presented based on synthesis of ideas and input.

Student effectively and directly integrates discussion/assignment content with relevant and compelling personal experiences, additional research, or current events from credible news sources. Specifically adds a new and/or different insight or perspective on the subject area(s) being discussed or treated in the assignment.

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