You Are Reading the 2006 Annual Report of Curpen Corporation

Essay

You are reading the 2006 annual report of Curpen Corporation and you find the following items in its footnotes.

a. The useful life of machinery has been increased from 10 to 15 years.
b. The expected rate of return on plan assets has been increased to 10% from 8%.
c. The company has started to capitalize small tools purchased beginning in 2006.

For each of the above, determine the effect (higher, lower, or unchanged) of the change on the ratios listed below for the year 2006:

a. Debt-to-equity
b. Return on assets
c. Cash Flow from operations