Using Excel and WorldCom’s income statement

Using Excel and WorldCom’s income statement and balance sheet for 2001, provided on pages F-2 and F-3 of Form 10-K, prepare a common-size balance sheet and income statement for the years 2000 and 2001. Using formulas, compute the following ratios: gross margin percent, return on sales, return on assets, return on equity, total asset turnover, accounts receivable turnover, accounts receivable days, debt to assets, equity to assets, debt to equity, equity multiplier, current ratio, acid test, net working capital, book value per share, earnings per share, and price earnings.

Address the following questions and include your Excel spreadsheets in your submission as exhibits.

1. What did you learn about the relationship between the income statement and balance sheet?
2. Does your analysis raise any questions that might lead to a fraud hypothesis? Explain.