Ratio AnalysisRatioBarry ComputersIndustry AveragesCurrentCurrent Assets/Current Liabilities1.982.0XQuickCurrent Assets - Inventories/Current Liabilities1.251.3XDays Sales OutstandingReceivables/(Annual Sales/365)76.335daysInventory TurnoverSales/Inventories6.666.7XTotal Assets TurnoverSales/Total Assets1.703.0XProfit MarginNet Income/Sales2.3%1.2%ROANet Income/Total Assets3.9%3.6%ROENet Income/Common Equity10.2%9.0%ROICEBIT(1-T)Total Invested Capital7.48%7.5%TIEEBIT/Interest Charges3.333.0XDebt/Total CapitalTotal Debt/(Total Debt + Equity)48.5%47.0%M/BMarket Price/Book Value1.204XP/EPrice per Share/Earnings per Share11.7917.86XEV/EBITDA(Market Value of Equity + Market Value of Total Debt + Market Value of Other Financial Claims - Cash and Equivalents)/EBITDA6.249.00XBalance SheetEnter figures belowCash$77,500Receivables$336,000Inventories$241,500 Total Current Assets$655,000Net Fixed Assets$292,500 Total Assets$947,500Accounts Payable$129,000Other Current Liabilities$117,000Notes Payable to Bank$84,000 Total Current Liabilities$330,000Long-Term Debt$256,500Shares OutstandingCommon Equity (36,100 shares)$361,00036,100 Total Liabilities and Equity$947,500Income StatementSales$1,607,500Cost of Goods Sold0 Materials$717,000 Labor$453,000 Heat, light, and power$68,000 Indirect Labor$113,000 Depreciation$41,500$1,351,000Gross Profit$256,500Selling Expenses$115,000Gen. Admin Expenses$30,000 EBIT$70,000Interest Expense$21,000 EBT$49,000Tax BurdenFed and State Income Taxes (25%)$12,25025%Net Income$36,750Earnings per Share$1.018Price per Share $12.00Book Value (Common Equity/Shares)$10.00 Module 2 Assignment: Financial Health Assessment: Barry Computer Company Report prepared by: Phenekia Morgan Date: November 27, 2022 Walden University WMBA 6070: Managerial Finance 1 Part 1: Financial Information Introduction This paper provides a comprehensive financial statements analysis of Barry Computer Company. To achieve this objective, the analysis focuses on different ratios that reflect the financial performance of the company visa vis the industry performance. Liquidity ratios Current ratio: This ratio evaluates the proportion of the business's existing assets against its current liabilities. A current balance of more than one means that the firm has more current assets than current liabilities and is thus able to meet short-term claims (Welc, 2022). The current ratio of Barry Computer Company is 2, indicating that the company has a strong liquidity position. Comparably the current industry ratio is also two; thus, Barry Computer Company's liquidity position is within the industry performance. Quick ratio: The acid test ratio of a company assesses its capacity to settle short-term obligations with its most liquid resources. The corporation does not have enough liquid assets to cover its short-term liabilities if the quick ratio is less than 1.0. Barry Computer Company's quick.

1. Ratio AnalysisRatioBarry ComputersIndustry
AveragesCurrentCurrent Assets/Current
Liabilities1.982.0XQuickCurrent Assets - Inventories/Current
Liabilities1.251.3XDays Sales OutstandingReceivables/(Annual
Sales/365)76.335daysInventory
TurnoverSales/Inventories6.666.7XTotal Assets
TurnoverSales/Total Assets1.703.0XProfit MarginNet
Income/Sales2.3%1.2%ROANet Income/Total
Assets3.9%3.6%ROENet Income/Common
Equity10.2%9.0%ROICEBIT(1-T)Total Invested
Capital7.48%7.5%TIEEBIT/Interest Charges3.333.0XDebt/Total
CapitalTotal Debt/(Total Debt + Equity)48.5%47.0%M/BMarket
Price/Book Value1.204XP/EPrice per Share/Earnings per
Share11.7917.86XEV/EBITDA(Market Value of Equity +
Market Value of Total Debt + Market Value of Other Financial
Claims - Cash and Equivalents)/EBITDA6.249.00XBalance
SheetEnter figures
belowCash$77,500Receivables$336,000Inventories$241,500
Total Current Assets$655,000Net Fixed Assets$292,500 Total
Assets$947,500Accounts Payable$129,000Other Current
Liabilities$117,000Notes Payable to Bank$84,000 Total
Current Liabilities$330,000Long-Term Debt$256,500Shares
OutstandingCommon Equity (36,100 shares)$361,00036,100
Total Liabilities and Equity$947,500Income
StatementSales$1,607,500Cost of Goods Sold0
Materials$717,000 Labor$453,000 Heat, light, and
power$68,000 Indirect Labor$113,000
Depreciation$41,500$1,351,000Gross Profit$256,500Selling
Expenses$115,000Gen. Admin Expenses$30,000
EBIT$70,000Interest Expense$21,000 EBT$49,000Tax
BurdenFed and State Income Taxes (25%)$12,25025%Net
Income$36,750Earnings per Share$1.018Price per Share
$12.00Book Value (Common Equity/Shares)$10.00

2. Module 2 Assignment:
Financial Health Assessment: Barry Computer Company
Report prepared by: Phenekia Morgan
Date: November 27, 2022
Walden University
WMBA 6070:
Managerial Finance
1

3. Part 1: Financial Information
Introduction
This paper provides a comprehensive financial statements
analysis of Barry Computer Company. To achieve this
objective, the analysis focuses on different ratios that reflect the
financial performance of the company visa vis the industry
performance.
Liquidity ratios
Current ratio: This ratio evaluates the proportion of the
business's existing assets against its current liabilities. A
current balance of more than one means that the firm has more
current assets than current liabilities and is thus able to meet
short-term claims (Welc, 2022). The current ratio of Barry
Computer Company is 2, indicating that the company has a
strong liquidity position. Comparably the current industry ratio
is also two; thus, Barry Computer Company's liquidity position
is within the industry performance.
Quick ratio: The acid test ratio of a company assesses its
capacity to settle short-term obligations with its most liquid
resources. The corporation does not have enough liquid assets
to cover its short-term liabilities if the quick ratio is less than
1.0. Barry Computer Company's quick ratio is 1.3, which is the
same as the industry average. This demonstrates that the
company's liquidity position is stable.
Turnover ratios
Days sales outstanding: The capacity of a business to recover its
receivables is measured by its days sales outstanding ratio. An
organization's inability to collect its receivables is indicated by
a high DIO ratio, which might cause financial difficulties. A
low DIO ratio, on the other hand, shows that a business is
effective in collecting its receivables. Barry Computer Company
had 76 days of unpaid sales, compared to 35 days for the
industry. This finding suggests that Barry Computer Company

4. has trouble collecting its accounts receivable, which can result
in a cash shortage.
Inventory turnover: This ratio indicates the frequency at which
a business sells its stock. A high turnover ratio suggests that a
business sells its inventory expeditiously. According to Welch
(2022), low turnover ratio suggests that a business may have a
buildup in stock. Barry Computers Company's inventory
turnover ratio, which is 6.7, is the same as the industry average.
The corporation sells its products roughly seven times a year.
As a result, Barry Computers Company's inventory management
is consistent with market expectations.
Total assets turnover: This ratio is a financial metric that
measures a company's efficiency in using its assets to generate
sales. A high total asset turnover ratio indicates that a company
is generating many sales with relatively few assets, meaning
that it is efficient in its use of assets. A low total asset turnover
ratio indicates that a company needs to generate more sales with
its assets, meaning that it is not efficient in its use of assets.
Barry Computer Company has a lower asset turnover of 1.7
against the industry benchmark of 3.00. This shows that Barry
Company is less efficient in using its assets to earn revenue.
Profitability Ratios
Net profit margin: The net profit margin is a reliable measure of
a business's general effectiveness and profitability. A company
that has a higher net profit margin is more effective and
successful. A corporation that has a smaller net profit margin is
more inefficient and less successful. Due to its higher net profit
margin of 2.3% compared to the industry average of 1.2%,
Barry Computer Company generates higher earnings than most
of its rivals.
ROA: The ROA is a good indicator of a company's financial

5. health. A high ROA indicates that the company is generating
much profit from its assets, while a low ROA indicates not
generating enough profit from its assets (Saleh et al.,2022).
Barry Computer Company is generating slightly more profits
than its competitors, as shown by its ROA of 3.9% against the
industry's 3.6%.
ROE: The ROE is one of the most important ratios for investors
to understand because it measures how efficiently a company
uses its equity to generate profits. The higher the ROE, the
more efficient the company is. Barry Computer Company is
relatively more efficient than the competitors, as indicated by
its ROE of 10.2% visa vis the industry benchmark of 9.0%.
ROIC: This metric measures how much profit a company
generates for each dollar invested in capital. The higher the
ROIC, the more efficiently a company generates profits. The
ROIC of Barry Company is the same as the industry benchmark
of 7.5%, indicating that the company is equally efficient as the
competitors.
Solvency ratios
Times Interest ratio: The TIE ratio measures a company's ability
to cover its interest expenses with its earnings before interest
and taxes (EBIT). A company with a TIE ratio of 2.0 or higher
is generally considered financially healthy, as it indicates
earning enough income to comfortably cover its interest
payments (Restianti & Agustina, 2018). The TIE of Barry
Company is 3.3, while the competitors have 3.0 indicating that
company earnings are enough to cover debt obligations.
Debt/Total Capital Ratio: The leverage of a corporation is
determined by looking at its debt to total capital ratio. If a
corporation has a high ratio, it is likely heavily indebted and
may be at risk of defaulting on its debt obligations
(Haralayya,2021). On the other hand, a low ratio shows that a

6. corporation has a good financial position and is less likely to
default. Barry Company is comparatively more indebted than
the industry average, which stands at 47.0% versus the
company's 48.5%.
Market ratios
Market to Book value: This ratio compares the market value of
a company's assets to their book value. A high ratio means that
the market value of the company's assets is greater than the
book value. Barry Company's market value compared to book
value is lower than that of its rivals. Barry's M/B ratio is 1.2
compared to the industry's average of 4.0.
P/E: It calculates how much investors are prepared to pay for
each dollar of earnings generated by a company. A high P/E
ratio indicates that investors are prepared to pay a high price for
each dollar of earnings, while a low P/E ratio indicates that
investors are willing to pay a low price for each dollar of
earnings. Barry's company has a P/E of 11.79, but the industry
has a P/E of 17.86; as a result, investors will pay more for the
competitor's share than Barry's.
EV/EBITDA: This ratio is used to assess the value of a
company. A high ratio indicates that a company is overvalued,
while a low ratio indicates that a company is undervalued
(Kadim et al.,2020). Barry Computer Company is undervalued
because its EV/EBITDA ratio is 6.24 while the industry ratio is
9.00. This result shows that investors are likely not to be
confident about the prospects Barry and will therefore prefer the
competitors.

7. References
Haralayya, B. (2021). Ratio Analysis at NSSK, Bidar.
Iconic Research And Engineering Journals,
4(12), 170-182.
https://www.irejournals.com/formatedpaper/1702793.pdf
Kadim, A., Sunardi, N., & Husain, T. (2020). The modeling
firm's value is based on financial ratios, intellectual capital, and
dividend policy.
Accounting,
6(5), 859-870.
http://m.growingscience.com/beta/ac/4052-the-modeling-firms-
value-based-on-financial-ratios-intellectual-capital-and-
dividend-policy.html
Restianti, T., & Agustina, L. (2018). The effect of financial
ratios on financial distress conditions in sub-industrial sector
companies.
Accounting Analysis Journal,
7(1), 25-33.
https://journal.unnes.ac.id/sju/index.php/aaj/article/view/18996
Saleh, R., Mannan, A., & Aswan, A. (2022). Analysis of the
Effect of Financial Ratios on Profit Growth.
Hasanuddin Journal of Business Strategy,
4(1), 32-41.
https://feb.unhas.ac.id/jurnal/index.php/HJBS/article/view/511
Well, J. (2022). Financial statement analysis. In
Evaluating Corporate Financial Performance (pp. 131-
212). Palgrave Macmillan, Cham.
https://link.springer.com/chapter/10.1007/978-3-030-97582-1_3

8. 2
image1.emf
Module 2 Assignment:
Financial Health Assessment: Barry Computer Company
Report prepared by: Replace this text with your name.
Date: Replace this text with the submission date.
Walden University
WMBA 6070:
Managerial Finance

9. 1
Part 1: Financial Information
Replace this text with introductory information. Add or remove
headings as necessary.
[Heading]
Replace or remove this text. Add or remove headings as
necessary.
[Sub-Heading]
Replace or remove this text. Add or remove headings as
necessary.
Part 2: Recommendations
Replace this text with introductory information. Add or remove
headings as necessary.
[Heading]
Replace or remove this text. Add or remove headings as
necessary.
[Sub-Heading]
Replace or remove this text. Add or remove headings as

10. necessary.
References
[Please delete this note before submitting your Assignment. For
more information about formatting your reference list, please
visit the following site:
https://academicguides.waldenu.edu/writingcenter/apa/reference
s.]
Include appropriately formatted references to support your
Assignment. Refer to the Assignment guidelines for further
information on the requirements.
2
Note: In Week 4, you submitted Part 1 of the Module 2
Assignment.
You will complete and submit Part 2 this week.
As a reminder, you will continue to act as a consultant hired by
the operations director of the Barry Computer Company to do a
financial analysis and comparison to the industry. You will
conduct a financial ratio analysis to gain a good understanding
of the company’s financial performance and will then write up
an evaluation of the organization’s financial health, as well as
your recommendations for how specific ratios can be improved
within the next 3–5 years.
In your report, be sure to include relevant citations from the
Learning Resources, the Walden Library, and/or other
appropriate academic sources to support your work.
To prepare for this Assignment:
· Return to your Module 2 Assignment Part 2 Template to

11. complete Part 2 of your financial health assessment report.
Submit your assessment of a company’s financial performance,
to include the following:
Part 2: Recommendations
(2–3 pages)
· For
each ratio that negatively falls outside the industry
standards, develop at least one appropriate recommendation for
the Barry Computer Company to improve financial performance
over time (over the next 3–5 years to meet industry standards).
· Assess limitations of the exclusive use of ratio analysis for
evaluating financial performance. In your assessment, describe
any qualitative factors that could also complement the ratio
analysis and play an important role in improving financial
performance.
Refer to the Week 5 Assignment Rubric for specific grading
elements and criteria. Your Instructor will use this grading
rubric to assess your work.
**** Do Part 2 Only!!! (2-3 pages) Use Model 2 Assignment
Template that is attached.
Here is a Correction from Week 4 Assignment:
EV/EBITDA = market value of equity + market value of total
debt + market value of other financial claims – cash and
equivalents / (EBIT + Depreciation and Amortization)
= [(12*36,100) + 84,000 + 256,500 + 0 – 77,500] / (70,000 +
41,500) = 6.24
Correct is 6.24 not 6.64