Ethical Issue
As Beacon Company controller, you are responsible for informing the board of directors about its financial activities. At the board meeting, you present the following information.
2017 2016 2015
Sales trend percent 147.0% 135.0% 100.0%
Selling expenses to sales 10.1% 14.0% 15.6%
Sales to plant assets ratio 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
Inventory turnover 7.8 times 9.0 times 10.2 times
Accounts receivable turnover 7.0 times 7.7 times 8.5 times
Total asset turnover 2.9 times 2.9 times 3.3 times
Return on total assets 10.4% 11.0% 13.2%
Return on stockholders’ equity 10.7% 11.5% 14.1%
Profit margin ratio 3.6% 3.8% 4.0%
After the meeting, the company’s CEO holds a press conference with analysts in which she mentions the following ratios.
2017 2016 2015
Sales trend percent 147.0% 135.0% 100.0%
Selling expenses to sales 10.1% 14.0% 15.6%
Sales to plant assets ratio 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
Required
- Why do you think the CEO decided to report 4 ratios instead of the 11 prepared?
- Comment on the possible consequences of the CEO’s reporting of the ratios selected.