What did you learn about the relationship between the income statement and balan

Question

What did you learn about the relationship between the income statement and balance sheet?

Does your analysis raise any questions that might lead to a fraud hypothesis? Explain.

PARTICULAR

2000

2001

ASSETS

CURRENT ASSETS:

cash and cash equivalents

761

0.769441

1416

1.362665

accounts recievables

6815

6.89059

5308

5.10807

deffered tax asset

172

0.173908

251

0.241546

other current asset

2007

2.029261

2230

2.146005

total curent asset

9755

9.863199

9205

8.858287

0

FIXED ASSET

0

PROPERTY AND EQUIPMENT:

0

Transmission equipment

20288

20.51303

23814

22.91703

communication equipment

8100

8.189843

7878

7.581269

furniture fixtureless accumulated dep

2138

2.161714

1411

1.357854

construction in progress

6897

6.973499

5706

5.491079

TOTAL FIXED ASSET

37423

38809

INTANGIBLE ASSETS

46594

47.11081

50537

48.63349

OTHER ASSET

5131

5.187911

5363

5.160999

TOTAL ASSETS

98903

100

103914

100

LIABILITIES

CURRENT LIABILITIES

short term debt and current maturities of long term debt

7200

7.27986

172

0.165521

accrued interest

446

0.450947

618

0.594723

accounts payable

6022

6.088794

4844

4.661547

other current liabilities

4005

4.049422

3567

3.432646

TOTAL CURRENT ASSET

17673

17.86902

9201

8.854437

LONG TERM LIABILITIES

long term debt

17696

17.89228

30038

28.9066

deffered tax liability

3611

3.651052

4066

3.912851

other liabilities

1124

1.136467

576

0.554305

minority interest

2592

2.62075

101

0.097196

obligated preferred stock

798

0.806851

1993

1.917932

SHAREHOLDER EQUITY

preffered stock seiries b

common stock

29

0.029322

31

0.029832

additional paid in

52877

53.46349

54297

52.25186

retained earning

3160

3.19505

4400

4.234271

Unrealized holding gain (loss) on marketable equity securities

345

0.348827

-51

-0.04908

cumlative foreign currency adjustment

-817

-0.82606

-562

-0.54083

treasury stock

-185

-0.18705

-185

-0.17803

TOTAL LIABILITIES

98903

103914

INCOME STATEMENT

PARTICULAR

2000

2001

REVENUE

39090

100

35179

100

OPERATING EXPENSES

LINE COST

15462

39.55487

14739

41.89715

SELLING AND ADMINISTRATIVE EXPENSE

10597

27.10924

11046

31.39941

DEPRECIATION

4878

12.47889

5880

16.71452

OTHER CHARGES

TOTAL

30937

79.143

31665

90.01109

operating income

8153

20.857

3514

9.988914

other income and expense

interest expense

-970

-2.48145

-1533

-4.35771

miscelleneous

385

0.984907

412

1.171153

income before tax and interets

7568

19.36045

2393

6.802354

provision for tax

3025

7.738552

927

2.635095

income before interest

4543

11.6219

1466

4.167259

minority interest

-305

-0.78025

35

0.099491

efffect of account change

-85

-0.21745

0

net income

4153

10.6242

1501

4.26675

RATIOS

2000

2001

GROSS MARGIN RATIO

GROSS MARGIN/NET SALES

4.794554

10.0111

RETUEN ON SALES

INCOME BEFORE INTEREST AND TAX/REVENUE

0.193605

0.068024

RETUEN ON ASSETS

NET INCOME/TOTAL ASSETS

0.082434

0.033816

RETUEN ON EQUITY

NET INCOME/SHARE HOLDER EQUITY

0.147142

0.060659

ACCOUNT RECIEVABLE TURNOVER

SALES/AVERAGE ACCOUNT RECIEVABLE

7.399205

8.332307

ACCOUNTS RECIEVABLE DAYS

ACCOUNT RECIEVABLES/ONE DAY NET SALES

236.5136

438.5401

DEBT TO ASSETS

DEBT/ASSETS

0.178923

0.289066

EQUITY TO ASSETS

EQUITY/ASSETS

0.560236

0.55748

DEBTTO EQUITY

DEBT/EQUITY

0.31937

0.518522

CURRENT RATIO

CURRENT ASSETS/CURRENT LIABILITIES

0.551972

1.000435

ACID TEST RATIO

QUICK ASSETS/CURRENT LIABILITIES

0.54224

0.972177

NET WORKING CAPITAL

CURRENT ASSET-CURENT LIABILITIES

-7918

4

EARNING PER SHRE

0.91

0.48

http://www.sec.gov/Archives/edgar/data/723527/000100547702001226/d02-36461.txt

What did you learn about the relationship between the income statement and balance sheet?

Does your analysis raise any questions that might lead to a fraud hypothesis? Explain.

PARTICULAR

2000

2001

ASSETS

CURRENT ASSETS:

cash and cash equivalents

761

0.769441

1416

1.362665

accounts recievables

6815

6.89059

5308

5.10807

deffered tax asset

172

0.173908

251

0.241546

other current asset

2007

2.029261

2230

2.146005

total curent asset

9755

9.863199

9205

8.858287

0

FIXED ASSET

0

PROPERTY AND EQUIPMENT:

0

Transmission equipment

20288

20.51303

23814

22.91703

communication equipment

8100

8.189843

7878

7.581269

furniture fixtureless accumulated dep

2138

2.161714

1411

1.357854

construction in progress

6897

6.973499

5706

5.491079

TOTAL FIXED ASSET

37423

38809

INTANGIBLE ASSETS

46594

47.11081

50537

48.63349

OTHER ASSET

5131

5.187911

5363

5.160999

TOTAL ASSETS

98903

100

103914

100

LIABILITIES

CURRENT LIABILITIES

short term debt and current maturities of long term debt

7200

7.27986

172

0.165521

accrued interest

446

0.450947

618

0.594723

accounts payable

6022

6.088794

4844

4.661547

other current liabilities

4005

4.049422

3567

3.432646

TOTAL CURRENT ASSET

17673

17.86902

9201

8.854437

LONG TERM LIABILITIES

long term debt

17696

17.89228

30038

28.9066

deffered tax liability

3611

3.651052

4066

3.912851

other liabilities

1124

1.136467

576

0.554305

minority interest

2592

2.62075

101

0.097196

obligated preferred stock

798

0.806851

1993

1.917932

SHAREHOLDER EQUITY

preffered stock seiries b

common stock

29

0.029322

31

0.029832

additional paid in

52877

53.46349

54297

52.25186

retained earning

3160

3.19505

4400

4.234271

Unrealized holding gain (loss) on marketable equity securities

345

0.348827

-51

-0.04908

cumlative foreign currency adjustment

-817

-0.82606

-562

-0.54083

treasury stock

-185

-0.18705

-185

-0.17803

TOTAL LIABILITIES

98903

103914

Explanation / Answer

Balance sheet:

It is a statement of financial position as on a particular date. This date is usually the year-end date. It gives the detail of Assets, various liabilities and Owners Equity as on that date. Financial strength & its liabilities can be known from the balance sheet.

Income Statement:

It is a statement which shows the details of financial performance of an entity for a particular period. It quantifies the amount of revenue generated and expense incurred by the entity and the result of operation, whether it is profit or loss.

The analysis of the financial statements coupled with financial ratios, raises questions about existence of a fraud. This is discussed below in detail;

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