Company Xcel Ltd announces an increase of10% in net profit for the year to $1,700,000. As a potential investor in thecompany:

a) What does this announcement tellyou?

b) What other information do you require for deciding whether or not to invest in thecompany?

a) What does this announcement tellyou?

A.

The announcement tells us that the difference between theowners' claim in the company and thecreditors' claim in the company has increased over the past year.

B.

The announcement tells us that theowners' claim in the company has decreased over the past year.

C.

The announcement tells us that the rate of growth of theowners' claim in the company as a result of operations has increased over the past year.

D.

The announcement tells us that the company has10% more cash on hand than it had in the previous year.

b) What other information do you require for deciding whether or not to invest in thecompany?

A.

It is important to determine the depreciation method that the companyuses, as well as how old its depreciable assetsare, to determine how much it is losing to depreciation.

B.

It is important to see the statement of cash flows of the company to determine whether the company spends more money than it takes in. It would also be helpful to know how long the company has existed.

C.

It is important to see the statement of financial position of the company to determine whether the company is able to cover all of its liabilities. It would also be helpful to know thecompany's plans for future growth.

D.

It is important to see the income statement of the company to determine whether the company has more expenses than it has revenues. It would also be helpful to know the number of employees that the company has.