Please Refer to the Vertical Analysis of a Section of a Balance

question 31

Multiple Choice

Please refer to the vertical analysis of a section of a balance sheet,shown below:
$$\begin{array} { | l | r | r | r | r | } \hline { \text { (Dollar amounts in millions) } } & { \mathbf { 2 0 1 7 } } & & { \mathbf { 2 0 1 6 } } & \\\hline & \text { Amount } & \text { \% of total } & \text { Amount } & \% \text { of total } \\\hline \text {Assest}\\\hline \text { Current assets: } & & & & \\\hline \text { Cash } &\$ 10000 & 3.7 \% & \$ 7200 & 2.9 \% \\\hline \text { Accounts receivable, net } &15,600&5.7\%&16800&6.7\% \\\hline \text { Inventory } & 38000 & 13.9\% &31000 & 12.4 \% \\\hline \text { Total current assets } & 63600 & 23.2 \% & 55000 & 22.0 \% \\\hline \text { Property, plant and equipment, net } & 195000 & 71.3 \% & 168000 & 67.2 \% \\\hline \text { Other non-current assets } & 15000 & 5.5 \% & 27100 & 10.8 \% \\\hline \text { Total assets } & \$ 273600 & 100.0 \% & \$ 250100 & 100.0 \% \\\hline\end{array}$$
Which of the following statements accurately describes the 13.9% shown for Inventory in 2017?

• A) In 2017, inventory grew 13.9% over the previous year.
• B) In 2017, inventory was equal to 13.9% of the cash balance.
• C) Inventory declined as a percentage of total assets over the two year period.
• D) In 2017, inventory is equal to 13.9% of total assets.

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Definitions:

Restricted Stock

A type of stock that is not fully transferable until certain conditions have been met, typically used as part of employee compensation packages.

Transferable

The quality of an asset that allows it to be passed or conveyed from one entity to another.

Forfeiture

The loss of any right, property, or money, usually because of a breach of legal obligation or failure to fulfill some condition.

Financial Covenant

A clause in a loan agreement that requires the borrower to fulfill certain financial conditions, aiming to protect the lender’s interests by monitoring the financial performance and health of the borrower.