P rofessional Simulation In this simulation, you are asked to evaluate a company’s solvency and going concern potential by analyzing a set of ratios. You also are asked to indicate possible limitations of ratio analysis. Prepare responses to all parts.

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KWW Professional Simulation Financial Ratio Analysis Directions Time Remaining 0 hours 40 minutes Situation Analysis Explanation Resources As the accountant for Packard Clipper, Inc. you have been requested to develop some key ratios from the comparative financial statements. This information is to be used to convince creditors that Packard Clipper, Inc. is solvent and to support the use of going concem valuation procedures in the financial statements. The data requested and the computations developed from the financial statements follow. Current ratio Acid-test ratio 2015 2.6 times .8 times 2014 2.1 times 1.3 times Property, plant and equipment to equity 2.5 times 2.2 times Sales to equity 2.4 times 2.7 times Net income Up 32% Earnings per share $3.30 Down 9% $2.50 Book value per share Up 6% Up 9% Directions Situation Analysis Explanation Resources Packard Clipper asks you to prepare a list of brief comments stating how each of these items supports the solvency and going concem potential of the business. The company wishes to use these comments to support its presentation of data to its creditors. You are to prepare the comments as requested, giving the implications and the limitations of each item separately, and then the collective inference that may be drawn from them about Packard Clipper's solvency and going concem potential. Directions Situation Analysis Explanation Resources Having done as the client requested in the Analysis section above, prepare a brief listing of additional ratio-analysis-type data for this client that you think its creditors are going to request to supplement the analytical data you provided. Explain why you think the additional data will be helpful to these creditors in evaluating the client's solvency. What warnings should you offer these creditors about the limitations of ratio analysis for the purposes stated here? A