Interpreting balance sheet changes. Exhibit 2.14 presents a common-size balance sheet for Staples, Inc., an office supply retailer, for two recent years.

a. Identify the ways in which the structure of Staples assets and the structure of its financing correspond to what one would expect of a retail store chain.

b. Identify the major changes in the structure of Staples' assets and its financing over the two-year period and suggest possible reasons for the changes.

e. "An increase in the common-size balance sheet percentage between two year-ends for a particular balance sheet item (for example, cash) does not necessarily mean that its dollar amount increased." Explain.

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EXHIBIT 2.14 ASSETS Cashi Accounts Receivable inventories Other Current Assets STAPLES, INC. Common-Size Bolance Sheet. Problem 37) Total Current Assets Property, Plant, and Equipment Other Assets Total Assets LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts Payable. Notes Payable Other Current Liabilities. Total Current Liabilities Noncurrent Liabilities Bonds Payable Other Noncurrent Liabilities Total Noncurrent Liabilities Total Liabilities Shareholders' Equity Common Stock January 31 Year 6 Year 7 5.9% 14.6% 9.3 6.2 45.5 44.5 3.6 2.6 64.3% 67.9% 24.8 23.4 10.9 8.7 100.0% 100.0% 23.6% 26.1% 4 1.6 9.7 10.6 33.7% 38.3% 21.9% 20.7% 1.8. 1.6 23.7% 22.3% 57.4% 60.6% 28.4% 24.2% Retained Earnings 14.2 15.2 Total Shareholders' Equity 42.6% 39.4% Total Liabilities and Shareholders' Equity 100.0% 100.0%