Use the Information That Follows Taken from Tyler Company's Financial

question 44

Essay

Use the information that follows taken from Tyler Company's financial statements for the years ending December 31, 2017 and 2016.
$\begin{array}{lc}\text { Balance Sheet Information }&2017&2016\\\text { Assets }\\ \text { Cash } & \$ 90&\$50 \\ \text { Accounts receivable } & 60&80 \\ \text { Inventory } & 40&80 \\\text { Land, building, and equipment } & \underline{230} & \underline{270}\\\text { Total Assets } & \underline{ \$ 420}& \underline{\$480} \\\end{array}$

$\begin{array}{lrr}\text { Liabilities and Shareholders' Equity }\\\text { Accounts payable } & \$ 5 & \$ 85 \\\text { Common stock } & 260 & 260 \\\text { Retained earnings } & \underline{155} & \underline{135 }\\\text { Total Liabilities \& Shareholders' Equity } & \$ \underline{420} & \$ \underline{480} \\\end{array}$

$\begin{array}{lrr}\text { Income Statement Information }\\ \text { Sale revenue } &\$850\\ \text { Cost of goods sold } & \underline{600}\\ \text {Gross profit } &\$250\\ \text { Operating expenses} & \underline{230}\\ \text {Net income } & \underline{\$20}\\\end{array}$



The industry in which Tyler is a member has an average debt/equity ratio of 0.98. Determine if, as measured by Tyler's debt/equity ratio on December 31, 2017, Tyler is taking full advantage of investing borrowed capital in its operations relative to that of the average firm in its industry.

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Definitions:

Statement of Cash Flows

A financial report that summarizes the amount of cash and cash equivalents entering and leaving a company, revealing how a company raises and spends money.

Current Assets

Holdings that are planned to be turned into cash, sold off, or consumed in the span of one year or over the course of the operating cycle, if it extends beyond a year.

Accumulated Depreciation

Represents the total amount of depreciation expense that has been recorded against a fixed asset since it was acquired, reflecting its reduction in value over time.

Common Stock

Type of equity security that represents ownership in a corporation, with voting rights and the potential for dividends.