Question 1: What made the CEO decide on reporting only the 4 ratios?

Question 2: What are the possible consequences of the CEOs reporting decision?

Question 3: As controller, what advice would you give the CEO regarding his/her disclosure?

Question 4: What actions would you advise the company to take now? (And going forward)

CASE 1-7 Ethics Challenge As controller of Tallman Company, you are responsible for keeping the board of directors informed about the company's financial activities. At the recent board meeting, you presented the following financial data: 2006 2006 2005 2004 Sales trend percent...... 147.0% 135.0% 100.0% Selling expenses to net sales 10.1% 14.0% 15.6% Sales to plant assets 3.8 to 1 3.6 to 1 3.3 to 1 Current ratio 2.9 to 1 2.7 to 1 2.4 to 1 Acid-test ratio. 1.1 to 1 1.4 to 1 1.5 to 1 Merchandise inventory turnover....7.8 times 9.0 times 10.2 times Accounts receivable turnover...... 7.0 times Total asset turnover 2.9 times Return on total assets 9.1% Return on stockholders' equity.... 9.75% Profit margin. 3.6% 2005 2004 7.7 times 8.5 times 2.9 times 3.3 times 9.7% 10.4% 11.50% 12.25% 3.8% 4.0% After the meeting, the company's CEO held a press conference with analysts in which she mentions the following ratios: 2006 2005 2004 2006 2005 2004 Sales trend percent...... 147.0% Selling expenses to net sales ........ 10.1% 135.0% 14.0% 100.0% 15.6% Sales to plant assets Current ratio 3.8 to 1 2.9 to 1 3.6 to 1 2.7 to 1 3.3 to 1 2.4 to 1