Question

Arbor Corporation’s financial statements for 2014 showed the following:


Notice in these data that the company had a debt of only $40,000 compared with common stock outstanding of $230,000. A consultant recommended the following: debt, $90,000 (at 9 percent) and common stock outstanding of $180,000 (18,000 shares). That is, the company should finance the business with more debt and less owner contribution.

Required (round to nearest percent):
1. You have been asked to develop a comparison between (a) the actual results and (b) the results had the consultant’s recommendation been followed. To do this, you develop the following schedule:


2. Based on the completed schedule in requirement (1), provide a comparative analysis and interpretation of the actual results and the consultant’srecommendation.


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  • CreatedJuly 01, 2014
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