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 finandal 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 Llabilities and equity Current liabilities: Accounts payable Accruals $0 $0 $6,457 2,363 2,953 410 0 Current assets: Cash and equivalents Accounts receivable Inventories Total current assets Net fixed assets: Net plant and equipment Notes payable 2,324 2,187 8,662 $19,687 6,930 $15,750 Total current liabilities $2,187 6,563 8,203 $10,937 $19,250 $8,750 Long-term debt Total debt Common equity: Common stock 21,328 17,063 Retained earnings 9,187 Total common equity $32,813 $26,250 Total assets $43,750 $35,000 Total liabilities and equity $43,750 $35,000 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 pool of relatively liquid assets, which are available to support the company's current and future sales, decreased from Year 1 to Year 2. This statement is because: O Green Caterpillar's total current liabilities balance increased from $2,363 million to $2,953 million between Year 1 and Year 2 Green Caterpillar's total current asset balance actually increased from $15,750 million to $19,687 million between Year 1 and Year 2 Green Caterpillar's total current.labilities balance decreased by $3,937 million between Year 1 and 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 because: 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 O Green Caterpillar's Year 2 cash and equivalents balance is $20,317 The funds recorded in Green Caterpillar's accounts receivable account represents funds that are either cash or can be converted into cash almost immediately Statement #3: If Green Caterpillar ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders. because: This statement is O Debtholders are treated as residual investors Common shareholders are treated as residual investors Debtholders and preferred shareholders are considered 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 $3 million of new common stock
