Use the common-size financial statements prepared for Study Problem to respond to your boss’s request that you write up your assessment of the firm’s financial condition. Specifically, write up a brief narrative that responds to the following questions:
How much cash does Carver have on hand relative to its total assets?
a. What proportion of Carver’s assets has the firm financed using short-term debt? Long-term debt?
b. What percent of Carver’s revenues does the firm have left over after paying all of its expenses (including taxes)?
c. Describe the relative importance of Carver’s major expense categories, including cost of goods sold, operating expenses, and interest expenses.