Paint Company Following Are Selected Data from Paint Company's Financial Statements

question 241

Multiple Choice

Paint Company
Following are selected data from Paint Company's financial statements.

-Refer to the Paint Company data. The company's debt-to-equity ratio was 0.83 to 1 in 2016 and 0.89 to 1 in 2015. Which of the following statements is true concerning Paint?

• A) The company has a smaller percentage of capital from owners at the end of 2016 than at the end of 2015.
• B) The company relied more on creditors for financing during 2016 than in 2015.
• C) The company is improving its debt-to-equity ratio.
• D) The company appears to be in a weaker position at the end of 2016 to finance capital expenditures from cash flow generated by operating activities.

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Definitions:

Statement of Comprehensive Income

A financial report that includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Statement of Cash Flows

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, dividing activities into operating, investing, and financing.

Retained Earnings Statement

A summary of the changes in the retained earnings in a corporation for a specific period of time, such as a month or a year.

Fair Value

The estimated market value of an asset or liability, based on current prices in an active market.