You are a part-time financial advisor. A client is considering an investment in common stock of a waste recycling firm. One motivation is a rumor the client heard that the company made considerable investments in a new fuel creation process. Unable to confirm the news, your client asks you to determine whether the firms assets had recently increased significantly.

Because the firm is small, information is sparse. Last quarters interim report showed total assets of $324 million, approximately the same as the prior years annual report. The only information more current is a press release issued last week when management reported record net income for the year of $21 million, representing a 14% return on shareholders equity. The performance was enhanced by the Companys careful use of financial leverage on a debt/equity ratio of 2 to 1.