You are planning the audit of Ruta Corp., a privately held publisher of comic books. Step 1 of the preliminary analytical procedures requires you to gather as many facts as possible on the company's activities in the past year that may affect the financial statements. Among those facts are the following:

a. The company has switched to a "just-in-time" inventory system whereby input factors, such as pulp paper and ink, are ordered so that they arrive just before they are needed in the production process.

b. The company recently sold its old fleet of delivery trucks and now uses contracted carriers.

c. In an attempt to increase sales and spread its distribution, the company loosened credit terms.

d. The company refinanced its mortgage on the factory in such a way that, although its interest rate is lower, it had to pay the bank a large up-front fee.

e. Negotiations with the printers' union left the company agreeing to higher pension benefits.

f. Although the company has used the double-declining-balance method for depreciation, it changed to the straight-line method for many of its fixed assets this year to mirror its tax depreciation method. (The relevant tax authority allows a switch to straight-line depreciation when doing so increases depreciation expense over accelerated methods.)

g. The company acquired a small rival for cash in a purchase combination.

h. Its marketing department has been successful at introducing a higher-end, highermargin product designed to appeal to aging baby boomers and collectors.

For each of the above, discuss the accounts and ratios that you expect will be affected in your preliminary analytical procedures. Include the direction and probable magnitude of the change (if any) and remember the effect on the overall profitability ratios. Then comment briefly on your ability to draw any firm conclusions from the analytical procedures given these facts.