2. Balance sheet The balance sheet provides a snapshot of the financial condition of a company. Investors and analysts use the information given on the balance sheet and other financial statements to make several interpretations regarding the company's financial condition and performance, Green Caterpillar Garden Supplies Inc. is a hypothetical company. Suppose it has the following balance sheet Items reported at the end of its first year of operation. For the second year, some parts are still incomplete. Use the information given to complete the balance sheet. Green Caterpillar Garden Supplies Inc.Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current assets: Current liabilities: Cash and $6,457 Accounts payable $0 equivalents Accounts receivable 2,953 2,363 Accruals 410 Inventories 5,662 6,930 Notes payable 2,324 2,187 Total current assets $19,687 $15,750 Total current $2,187 liabilities Net fixed assets: Long-term debt 8,203 6,563 Net plant and $19,250 Total debt $10,937 S8,750 equipment Common equity: Common stock 21,328 17,063 Retained earings 9.187 Total common $32,813 $26,250 equity Total assets $43,750 $35,000 Total liabilities and $43,750 535,000 equity Given the information in the preceding balance sheet-and assuming that Green Caterpillar Garden Supplies Inc. has 50 million shares of common stock outstanding-read each of the following statements, then identify the selection that best interprets the information conveyed by the balance sheet. Statement #1: Green Caterpillar's accumulated owed financial obligations decreased from Year 1 to Year 2. This statement is , because: Accruals actually increased from $0 in Year 1 to $410 million at the end of Year 2 The accounts payable account remained $0 for both Years 1 and 2 Long-term debt decreased from $2,324 million at the end of Year 1 to $2,187 million by the end of Year 2 Statement #2: On December 31 of Year 2, Green Caterpillar Garden Supplies Inc. had $8,072 million of actual money that it could have spent immediately. This statement is 1, because: The funds recorded in Green Caterpillar's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately The funds recorded in Green Caterpillar's cash and equivalents account represents funds that are either cash or can be converted into cash almost immediately Green Caterpillar's Year 2 cash and equivalents balance is 520,317 Statement #3: If Green Caterpillar ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders. This statement is , because: Debtholders are treated as residual investors Debtholders and preferred shareholders are considered residual Investors Common shareholders are treated as residual investors Based on your understanding of the different items reported on the balance sheet and the information they provide, if everything else remains the same, then the cash and equivalents item on the current balance sheet is likely to if the firm issues S3 million of new
