Jordan Li is interested in purchasing the stock of Mendella, a company that sells concrete mixtures to the construction industry. Before purchasing the stock, Jordan would like to learn as much as possible about the company. However, all she has to go on is the current year’s (Year 3) annual report, which contains no comparative data other than the summary of the ratios given below:

Jordan would like answers to a number of questions about the trend of events for Mendella over the past three years. She has the following questions:
a. Is it becoming easier for the company to pay its bills as they come due?
b. Are customers paying their accounts as well as they were in Year 1 ?
c. Is the level of inventory increasing, decreasing, or remaining constant?
d. Is the market price of the company’s stock going up or down?
e. Is the company employing financial leverage to the advantage of the common stockholders?

Required
Answer each of Jordan’s questions using the data given above. In each case explain how you arrived at your answer.

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Year 3 Year 2 Year 1 Current Ratio Acid-test (quick) ratio 2.5:1 0.8:1 2.3:1 2.1:1 0.9:1 Accounts receivable turnover 8.2 times 9.3 times 1.0:1 10.5 times Inventory turnover 5.2 times 6.8 times 7.1 times. Return on total assets 13.5% 12.1% 10.3% Return on common stockholder's equity 16.2% 14.1% 11.9% Price-earnings ratio 13.5 16.2 16.8 Earnings per share $1.42 $1.41 $1.44