-9 e Solve the Dilemma toRD LO 14-6 Exploring the Secrets of Accounting statement. With Mary Pruitt, the firm's trusted senior financial You have just been promoted from vice president analyst, by your side, you delve into the accounting statemen of marketing of BrainDrain Corporation to presi- as never before. You resolve to "get to the bottom" of the firm's dent and CEO! That's the good news. Unfortu- financial problems and set a new course for the futur nately, while you know marketing like the back of your hand, you know next to nothing about fi- nance. Worse still, the "word on the street" is that BrainDrain is in danger of failure if steps to correct large and continuing finan- cial losses are not taken immediately. Accordingly, you have asked the vice president of finance and accounting for a com- plete set of accounting statements detailing the financial opera- course that will take the firm from insolvency and failure to fi- nancial recovery and perpetual prosperity. Discussion Questions 1. Describe the three basic accounting statements. What types of information does each provide that can help you evaluate the situation? Which of the financial ratios are likely to prove to be of greatest value in identifying problem areas in the company? Why? Which of your company's financial ratios might you expect to be especially poor? Discuss the limitations of ratio analysis 2. tions of the company over the past several years. Recovering from the dual shocks of your promotion and feel ing the weight of the firm's complete accounting report for the y first time, you decide to attack the problem systematically and learn the "hidden secrets" of the company, statement by 3