Consider Sigma Designs’ balance sheets for 1993 and 1992 (dollars in thousands). Sigma Designs is a high-tech software development company specializing in imaging and multimedia computer applications.

Assets 1993 1992 Current Assets Cash and equivalents $ 5,086 $ 9,283 Marketable securities 14,326 19,537 Accounts receivable, net of allowances 6,471 2,987 Inventories 12,275 10,066 Prepaid expenses and other 435 753 Income taxes receivable 1,582 2,428 Total current assets 40,175 45,054 Equipment, net 1,626 1,607 Other assets 2,466 2,388 Total assets $44,267 $49,049 Liabilities and Shareholders’ Equity Current liabilities Accounts payable $ 4,933 $ 1,826 Accrued salary and benefits 809 594 Other accrued liabilities 737 1,119 Total current liabilities 6,479 3,539 Other long-term liabilities — 755 Total liabilities 6,479 4,294 Shareholders’ Equity Common stock 19,287 19,088 Retained earnings 18,501 25,667 Shareholders’ equity 37,788 44,755 Total liabilities and shareholders’ equity $44,267 $49,049 Required

a. Conduct a vertical analysis of Sigma Designs’ balance sheets. What conclusions can be drawn from these ratios?

b. Calculate the current and quick ratios for each year.

c. Does it seem that Sigma Designs has any liquidity problems? What major changes in current assets and current liabilities may contribute to these liquidity comparisons?

d. Calculate and evaluate the debt-to-assets ratio for Sigma Designs.

e. Concentrate on the equity section of the balance sheet. What may have caused the changes shown, as in the decrease in Retained Earnings and in Shareholders’ Equity?

f. Examine the Income Taxes Receivable section. How can a company have income taxes that are receivable and not payable? How are such receivables usually satisfied? Will the government just issue a refund check to Sigma Designs?