Ratios were formulated through the information given below. Please explain the c

Question

Ratios were formulated through the information given below.

Please explain the change in the bottom 3 ratios below.

Make sure to include explanations of any reasoning fraud may be occurring (~3-4 sentences each for a total of 9-12 sentences) thank you.

INCOME STATEMENT 2009 2008 2007 Net Sales Less Cost of Goods Sold 38184150 24917013 46943293 29151791 46201858 28284981 Gross Profit 13267137 17791502 17916877 Other Operating Revenue Less: Operating Expenses 10653243 10792064 10066385 Operating Income 2613894 6999438 7850492 Less: Interest Expense (no capitalized interest) 411131 494223 Other Income (Expenses) Unusual or Infreq. Item; 273836 Gain (Loss) Equity in Earnings of Assoc Profit (Loss) Income beforeTaxes 2887730 7410569 8344715 Less :Taxes Related to Operations 911062 2916280 3188195 N. I. before Noncontr. Inc 1976668 4494289 5156520 Noncontrolling income (loss) N. I. before Nonrecurring Items Oper.of Discontinued Segment 1976668 4494289 5156520 Income (Loss Disposal of Discont.Segment: Extraordinary Item Cum. Effect of Acct Change Gain (Loss) Gain (Loss) Gain (Loss) Net Income (Loss 1976668 4494289 5156520

Explanation / Answer

1. A debt ratio can be expressed as " DEBT- ASSETS" ratio i.e. proportion of total assets financed by the debt Here there is an decrease in debt ratio indicating company is either earning profits to purchase the assetsor or would have sufficient cash balance to finace the assets. analysing the company either indulging in the fraud or not depends on the source of those cash balances.

2.A debt to equity ratio is usage of shareholders equity as well as debts to finance the company debts.In the given instance there is decrease in the debt equity ratio instancing increase in the shareholders equity either by incease in share capital and as well as profit reserve.

3.Debt to tangible net worth indicating the ratio of total liabilities to the share holders equity excluding intangible assets. i.e. in th edue course of winding up hoe much the company can afford to repay the debt ie creditors

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