a) Explain why equity as reported on the balance sheet is not a good indication of the value of a company.

b) You are considering lending to a company. You are worried about a recession occurring next year. Would you be more likely to invest in the company if they had high operating leverage or low operating leverage? Why?

c) If you were investing in a company and expected revenue to increase significantly next year would you rather the company have high financial leverage or low financial leverage? Why?

d) If the goodwill account increases, what information does that convey to an analyst?