Then, read the Ethics Challenge Case 1-7 on page 63 in your text. Answer the following questions below.

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 2005 2004 Sales trend percent. 1470% 135.0% 100.0% Selling expenses to net sales....... 10.1% 14.0% 15,6% Sales to plant assets 3.8 to 1 3.5 to 1 3.3 to 1 Current ratio 2.9 to 1 2.7 to 1 24 to 1 Acid-test ratio..... 1.1 to 1 1.4 to 1 1.5 to 1 Merchandise inventory tumover... 7.8 times 9.0 times 10.2 times 2006 2005 2004 Accounts receivable turnover.....7.0 times 7.7 times 8.5 times Total asset turnover.... 2.9 times 29 times 3.3 times Return on total assets 9.1% 9.7% 10.4% Return on stockholders' equity.... 9.75% 11.50% 12.25% Profit margin 3.6% 3.8% 4.0% After the meeting, the company's CEO held a press conference with analysts in which she mentions the following ratios: 2005 2004 2006 2005 2004 Sales trend percent Selling expenses to net sales 2006 147.0% 10.1% 135.0% 14.0% 100.0% 15.6% Sales to plant assets Curent role 3.8 to 1 2.9 to 1 3.6 to 1 27to 1 3.3 to 1 24 to 1 Required: a. Why do you think the CEO decided to report these 4 ratios instead of the 11 ratios that you prepared? b. Comment on the possible consequences of the CEO's reporting decision