168.
What are the four standards for comparisons in financial analysis? Give an example of
each.
169.
Identify and describe three common tools of financial statement analysis.
170.
What is the purpose of a good financial statement analysis report? What are the key
components?
171.
Describe the purpose of horizontal financial statement analysis and how it is applied.
172.
Describe the purpose of vertical financial statement analysis and how it is applied.
173.
Describe ratio analysis including its purpose, application, and interpretation.
Essay Questions
174.
A company’s sales in Year 1 were $280,000, and its sales in Year 2 were $341,600. Using
Year 1 as the base year, what is the sales trend percent for Year 2?
13-106
175.
Calculate the percent increase or decrease for each of the following financial statement
items:
Year 2
Year 1
Cash
$37,500
$30,000
Accounts receivable
63,000
52,500
Inventory
67,500
90,000
Accounts payable
35,100
27,000
Sales
187,500
150,000
Equipment
165,000
125,000
13-108
176.
Comparative statements for Warmer Corporation are shown below:
Warmer Corporation
Comparative Income Statements
For the years ended December 31
2016
2017
2016
Sales
$14,800
$13,229
$13,994
Cost of goods sold
8,225
8,661
8,375
Gross profit
6,575
4,568
5,619
Operating expenses
3,664
3,576
3,487
Operating income
$2,911
$992
$2,132
Calculate trend percentages for all income statement amounts shown and comment on
the results. Use 2016 as the base year. Comment on the results.
177.
Calculate the percent increases for each of the following selected balance sheet items.
Sales
Cost of goods sold
Gross profit
Operating expenses
Operating income
2017
2016
Cash
$569
$448
Accounts receivable
2,234
2,337
Merchandise inventory
1,062
1,071
Plant assets
2,432
2,138
Bonds payable
1,164
1,666
Equity
2,777
2,894
178.
Calculate the percent increases for each of the following balance sheet items.
2017
2016
$1,439
$1,732
2,332
2,198
1,764
1,636
2,037
2,294
decrease
179.
For the following financial statement items, calculate trend percentages using 2014 as the
base year:
2018
2017
2016
2015
2014
Sales
$1,195,400
$1,118,000
$1,049,000
$963,200
$860,000
Cost
of
sales
752,400
704,000
671,000
616,700
559,000
Gross
profit
$443,000
$414,000
$378,000
$346,500
$301,000
Sales
139.0%
130.0%
122.0%
112.0%
goods sold
180.
Express the following income statement information in common-size percentages and in
trend percentages using 2016 as the base year.
Common-
Size
Percentages
Trend
Percentages
2017
2016
2017
2016
2017
2016
Sales
$540,000
$460,000
____
____
____
____
Cost
of
goods
sold
290,000
240,000
____
____
____
____
Gross
profit
$250,000
$220,000
____
____
____
____
13-113
181.
The comparative balance sheet for Silverlight Co. is shown below. Express the balance
sheet in common-size percentages.
Silverlight Company
Comparative Balance Sheets (in $000)
December 31
2018
2017
2016
Cash
$49.6
$34.2
$35.7
Accounts receivable
74.4
85.5
76.5
Merchandise inventory
148.8
125.4
91.8
Plant assets (net)
347.2
324.9
306.0
Total assets
$620.0
$570.0
$510.0
Accounts payable
$117.8
$51.3
$76.5
Bonds payable
130.2
159.6
107.1
Common stock
266.6
279.3
265.2
Retained earnings
105.4
79.8
61.2
Total liabilities and equity
$620.0
$570.0
$510.0
Silverlight Company
Accounts receivable
Merchandise inventory
Plant assets (net)
13-115
182.
Express the following balance sheets for Safety Company in common-size percentages.
Safety Company
Balance Sheets
December 31, 2017 and 2016
2017
2016
Assets
Cash
$43,000
$22,000
Accounts
receivable
38,000
42,000
Merchandise
inventory
61,000
52,000
Prepaid
insurance
6,000
9,000
Long-term
investments
49,000
20,000
Plant assets
(net)
218,000
218,000
Total assets
$415,000
$363,000
Liabilities and
Equity
Current
liabilities
$62,000
$75,000
Long-term
liabilities
45,000
36,000
Common stock
150,000
150,000
Retained
earnings
158,000
102,000
Total liabilities
and equity
$415,000
$363,000
13-116
183.
Express the following income statement information in common-size percentages (round
to nearest whole percent). Comment on the results.
13-117
Haans Corp.
Comparative Income Statements
For Years Ended December 31, 2017 and 2016
2017
2016
Sales
$1,200,000
$1,000,000
Cost of goods
sold
804,000
650,000
Gross profit
$396,000
$350,000
Selling
expenses
132,000
120,0000
Administrative
expenses
180,000
150,000
Net income
$84,000
$80,000
Gross profit
Selling expenses
General expenses
Net income
13-118
184.
Use the balance sheets of Glover shown below to calculate the following ratios for 2017
(round to the hundredths):
(a) Current ratio.
(b) Acid-test ratio.
(c) Debt ratio.
(d) Equity ratio.
Glover Company
Balance Sheets
December 31, 2017 and 2016
2017
2016
Assets:
Cash
$43,000
$22,000
Accounts
receivable
38,000
42,000
Merchandise
inventory
61,000
52,000
Prepaid
insurance
6,000
9,000
Long-term
investments
49,000
20,000
Plant assets
(net)
218,000
218,000
Total assets
$415,000
$363,000
Liabilities and
Equity:
Current
liabilities
$62,000
$75,000
Long-term
liabilities
45,000
36,000
Common stock
150,000
150,000
Retained
earnings
158,000
102,000
Total liabilities
and equity
$415,000
$363,000
1.31
13-120
185.
Use the balance sheets of Plover Company shown below to calculate the following ratios
for 2017 (round to the hundredths):
(a) Current ratio.
(b) Acid-test ratio.
(c) Debt ratio.
(d) Equity ratio.
Plover Company
Balance Sheets
December 31, 2017 and 2016
2017
2016
Assets:
Cash
$23,000
$26,000
Accounts receivable
26,000
38,000
Merchandise inventory
51,000
54,000
Prepaid insurance
8,000
7,000
Total current assets
108,000
125,000
Long-term investments
89,000
20,000
Plant assets (net)
208,000
198,000
Total assets
$405,000
$343,000
Liabilities and Equity:
Current liabilities
$52,000
$65,000
Long-term liabilities
65,000
46,000
Total liabilities
117,000
111,000
Common stock
150,000
140,000
Retained earnings
138,000
92,000
Total equity
288,000
252,000
Total liabilities and equity
$405,000
$343,000