Using vertical common-size analysis and restating the balance sheets using total assets as the benchmark to analyze changes at Tab between fiscal year 2003 and fiscal year 2005, an analyst would correctly conclude that Tab:

Tab, Inc., Income Statements for Fiscal Years 2003, 2004, and 2005
Amount (in millions of dollars)
2005 2004 2003
Revenues $25,000 $22,000 $21,000
Cost of sales 20,000 18,000 17,000
Gross profit $5,000 $4,000 $4,000
Selling, general, and administrative expenses 500 500 800
Operating income $4,500 $3,500 $3,200
Interest and other nonoperating expense 200 250 250
Earnings before income taxes $4,300 $3,250 $2,950
Income tax 1,410 975 885
Net income $2,890 $2,275 $2,065
Tab, Inc., Balance Sheets as of End of Fiscal Years 2003, 2004, and 2005
Amount (in millions of dollars)
2005 2004 2003
Cash, cash equiv., and marketable securities $200 $150 $100
Accounts receivable 1,800 1,350 900
Inventories 8,000 7,500 7,000
Total current assets $10,000 $9,000 $8,000
Net property, plant, and equipment $20,000 19,000 19,000
Intangible assets 1,000 1,000 1,000
Total assets $31,000 $29,000 $28,000
Accounts payable $500 $790 $615
Debt due in one year 1,000 1,000 1,000
Long-term debt 12,000 13,000 14,000
Shareholders’ equity 17,500 14,210 12,385
Total liabilities and equity $31,000 $29,000 $28,000
A. reduced its relative investment in inventory.
B. increased the role of intangible assets in its investments.
C. decreased its reliance on debt financing relative to equity financing

Ans: C. decreased its reliance on debt financing relative to equity financing