Assume that Carla Harris of Morgan Stanley (MorganStanley.com) has impressed you with the company’s success and its commitment to ethical behavior. You learn of a staff opening at Morgan Stanley and decide to apply for it. Your resume is successfully screened from those received and you advance to the interview process. You learn that the interview consists of analyzing the following financial facts and answering analysis questions below. (The data are taken from a small merchandiser in outdoor recreational equipment.)

Required

1. Is it becoming easier for the company to meet its current liabilities on time and to take advantage of any available cash discounts? Explain.

2. Is the company collecting its accounts receivable more rapidly? Explain.

3. Is the company’s investment in accounts receivable decreasing? Explain.

4. Is the company’s investment in plant assets increasing? Explain.

5. Is the owner’s investment becoming more profitable? Explain.

6. Did the dollar amount of selling expenses decrease during the three-year period? Explain.

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2021 2020 2019 Sales trend percents.... Selling expenses to sales..... 137.0% 125.0% 100.0% 9.8% 13.7% 15.3% Sales to plant assets ratio . 3.5 to 1 3.3 to 1 3.0 to 1 Current ratio . 2.6 to 1 2.4 to 1 2.1 to 1 Acid-test ratio.... Merchandise inventory turnover ..... 0.8 to 1 1.1 to 1 1.2 to 1 7.5 times 8.7 times 9.9 times Accounts receivable turnover . 6.7 times 7.4 times 8.2 times Total asset turnover . 2.6 times 2.6 times 3.0 times Return on total assets.. 8.8% 9.4% 11.1% Return on equity... 9.75% 11.50% 12.25% Profit margin ratio.. 3.3% 3.5% 3.7%