Question

In: Accounting

Analyze the following items on the balance sheet for your base company that would be important...

Analyze the following items on the balance sheet for your base company that would be

important to an investor, and discuss whether your company’s performance related to these

items appeared to be improving, deteriorating, or remaining stable. Justify your answer.

Company1 Items	31-Dec-15	12/31/2016	12/31/2017
Equity ratio	12.7	12.6	12.13
Liability ratio	0.9	0.9	0.9
Good will	$1,227	$1,227	$1,227
Treasury stock	-3343	-3130	-2892
Retained earnings	$11,253	$12,649	$14,408

Company2 Items	9/30/2015	9/30/2016	9/30/2017
Equity ratio	4.4	4.7	4.3
Liability ratio	0.8	0.8	0.8
Good will	$2,467	$2,467	$4,213
Treasury stock	-1765	-2121	-2116
Retained earnings	$5,038	$5,518	$6,011

Expert Solution

A)Company 1

I)Equity ratio- Equity ratio means total shareholders fund by Total liabilities of the company .In the given problem Since at year 2017 there was increase in equity ratio which represents improving

ii) Liability ratio

Liability ratio means total liabilities by total assets.If the liability ratio is less than 1 it is good for the company and it represents company can repay it's debt due to insolvency.Since there is no change in liability ratio it remains stable .

iii) Good will -Good will is the intangible asset of the company since there was no change it remains stable

IV)Treasury stocks - It represents un sold goods of the company and it comes under current assets of the company since it is getting decrease every year it is deteriorating to company

V) Retained earnings -Retained earnings is reserves for the company since it is increasing it is improving

B) Company 2

I) Equity ratio - Since it is decreasing it is deteriorating

ii)Liability ratio- There was no change it is stable

iii) Good will - There was increase hence it is improving

IV) Treasury stock -There was increase in asset it is improving

V) Retained earnings - There was increase in retained earnings it is improving

ekkarill92 answered 1 year ago

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