11 May DESCRIBE THE STRENGTHS AND WEAK POINTS REVEALED IN THE ANALYSIS.
Calculation of reasons
Kretovich Company has a quick ratio of 1.4, a ratio of circulating 3.0, a
rotation of inventory 6 times, total current assets of $ 810,000, cash and
marketable securities of $ 120,000. What were your annual sales and their
average period? Assume a year of 365 days.
4-9 Analysis of reasons
Then we give the data for Barry Computer Company and averages
their industry.
a. Calculate the reasons stated above.
b. Construct the extended Du Pont equation applicable to the company and its
industry.
c. Describe the strengths and weak points revealed in the analysis.
d. Assume that the company doubled sales and inventories, accounts
receivable, and common equity during 2005. How that information will affect
analyzing the reasons validity? (Hint: Think about averages and the effects
that rapid growth will have on the reasons if averages are not used. Not
no calculation is needed.)Barry Computer
Company: Balance Sheet at December 31, 2005 (in thousands)
Cash $ 77,500 Accounts
payable $ 129,000
Accounts receivable 336 000
Notes payable 84 000
Inventories 241 500 Other current liabilities 117 000
Total current assets $ 655,000 Total liabilities $ 330,000
Net fixed assets 292 500 Long-term debt 256 500
Stockholders’ equity 361 000
Total assets $ 947,500 Total
liabilities and equity $ 947,500
Barry Computer Company: income statement for the year endedDecember 31, 2005
(in thousands)
Sales $ 1,607,500
Cost of goods sold 1,392,500
Selling, general and administrative 145 000
Earnings before interest and taxes (EBIT) $ 70,000
Interest expense 24 500
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