5-105. Go to www.sec.gov and obtain WorldCom’s Form 10-K405 for 2001. Using the income statement found on page F-2 and the balance sheet found on page F-3 of the 10-K405 form:

a. Prepare a common-size balance sheet and income statement for years 2000 and 2001.

b. Compute the following financial ratios for years 2000 and 2001:

Profitability

• Gross margin percent

• Return on sales

• Return on assets

• Return on equity Efficiency

• Total asset turnover

• Accounts receivable turnover

• Accounts receivable days Leverage

• Debt to assets (including minority interest and preferred)

• Equity to assets

• Debt to equity

• Equity multiplier Liquidity

• Current ratio

• Acid test (quick) ratio

• Net working capital Equity • Book value per share • Earnings per share • Price to earnings

c. Does your analysis raise any questions that might lead to a fraud hypothesis? Explain.