P6-9.pdf

Comments:

This is an opportunity to make inferences about business models from the accounting reports. Accounting

should tell the story of the organization. Retail companies should have proportions in the balance sheet that

reflect their business model of being a retail company. Utility companies should have proportions in the

balance sheet that reflect their business model of being a utility company.

Working backwards in this problem, the ratios should suggest the business of the organization. For example:

• Utility companies have a high investments in assets.

• Inventory turns over faster than equipment, so a retail company’s asset turnover tends to be higher.

Problem Statement:

Required:

1. Which company is which? Explain how you identified each company from the data in the table.