XYZ Corporation is under investigation for possible financial statement fraud. As a forensic accountant, you have been asked to analyze the company's financial statements and identify any potential red flags. You have obtained the following financial information for the current year:

Sales revenue: $15,000,000
Accounts receivable: $4,500,000
Allowance for doubtful accounts: $300,000
Inventory: $7,500,000
Property, plant, and equipment: $10,000,000
Accumulated depreciation: $2,500,000
Accounts payable: $2,000,000
Notes payable: $3,500,000
Common stock: $5,000,000
Retained earnings: $5,500,000

Using this information, answer the following questions:

(a) Calculate the accounts payable turnover ratio for the current year. Interpret the ratio and explain what it indicates about the company's accounts payable.
(b) Calculate the debt-to-equity ratio and the debt-to-total-assets ratio for the current year. Interpret the ratios and explain what they indicate about the company's solvency.
(c) Calculate the return on assets ratio for the current year. Interpret the ratio and explain what it indicates about the company's profitability.
(d) Calculate the earnings per share for the current year, assuming that there are 1,000,000 shares outstanding. Interpret the ratio and explain what it indicates about the company's profitability.
(e) Based on your analysis, do you identify any potential red flags? Explain your answer.

Note: Round all ratios to two decimal places.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a The accounts payable turnover ratio is calculated as the cost of goods sold divided by ... View the full answer