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McGraw-Hill/Irwin
#16
horizontal analysis
16-2
#16
horizontal analysis
16-3
#16
financial ratios
16-4
Accounting Equation
16-5
Balance Sheet
Gives a financial picture of what a company is worth as
of particular date.
How
much the
company
owns
16-6
Assets
Liabilities
+
Owners
Equity
How
much the
company
owes
How
much the
owner is
worth
Assets
a. Current assets:
b. Cash
$ 7,000
c. Accounts receivable
9,000
d. Merchandise inventory
30,000
e. Prepaid expenses
15,000
f.
Total current assets
g. Plant and equipment:
h. Building (net)
$60,000
i. Land
84,000
j.
Total plant and equipment
k. Total assets
Liabilities
a. Current liabilities:
b. Accounts payable
$61,000
$205,000
Total of current assets
and plant and equipment.
(Total is double- ruled)
16-7
Liabilities broken
down into current
and long-term
$ 80,000
c. Salaries payable
d.
Total current liabilities
e. Long-term liabilities:
f.
Mortgage note payable
g.
Total liabilities
144,000 a.
b.
c.
d.
12,000
$ 92,000
58,000
$150,000
Stockholders Equity
Common stock
Retained earnings
Total stockholders equity
Total liab. and stkhlds equity
$ 20,000
35,000
55,000
$205,000
Step 1. Divide
each asset
(the portion) as a percent
of total assets (the base).
Round as indicated.
16-8
Assets
ROGER COMPANY
Comparative Balance Sheet
December 31, 2010 and 2011
2011
Amount Percent
Current Assets:
Cash
Accounts Receivable
Merchandise inventory
Prepaid rent
Total current assets
Plant and equipment:
Building (net)
Land
Total plant and equipment
Total assets
16-9
2010
Amount Percent
$22,000
8,000
9,000
4,000
$43,000
25.88
9.41
10.59
4.71
50.59
$18,000
9,000
7,000
5,000
$39,000
$18,000
24,000
$42,000
$85,000
21.19
28.24
49.41*
100.00
$18,000
24,000
$42,000
$81,000
22.22
11.11
8.64
6.71
48.15*
22.22
29.63
51.85
100.00
Liabilities
ROGER COMPANY
Comparative Balance Sheet
December 31, 2010 and 2011
2011
Amount Percent
Current liabilities:
Accounts payable
Salaries payable
Total current liabilities
Long-term liabilities:
Mortgage note payable
Total liabilities
2010
Amount Percent
$14,000
18,000
$32,,000
16.47
21.18
37.65
$8,000
17,000
$25,000
9.88
20.99
30.86*
$12,000
$44,000
14.12
51.76*
$20,000
$25,000
24.69
30.86*
Common stock
$20,000
Retained earnings
21,000
Total Stockholders equity
$41,000
Total Liabilities and Stockholders Equity $85,000
23.53
24.71
48.24
100.00
$20,000
16,000
$36,000
$81,000
24.69
19.75
44.44
100.00
Stockholders Equity
16-10
2011
2010
Increase(decrease)
Amount Percent
$ 6,000
5,000
9,000
5,000
$25,000
$ 4,000
6,000
4,000
7,000
$21,000
$ 2,000
(1,000)
5,000
(2,000)
$ 4,000
$12,000
18,000
$30,000
$55,000
$12,000
18,000
$30,000
$51,000
0
0
0
$4,000
50.00
-16.67
125.00
-28.57
19.05
0
0
0
7.84
Liabilities
Current liabilities:
Accounts payable
Salaries payable
Total current liabilities
Long-term liabilities:
Mortgage note payable
Total Liabilities
2010
2011
Increase(decrease)
Amount Percent
$ 3,200
2,900
$ 6,100
$ 1,800
3,200
5,000
$ 1,400
(300)
1,100
77.78
-9.38
22.00
17,000
$ 23,100
15,000
20,000
2,000
3,100
13.33
15.50
$31,900
$55,000
31,000
51,000
$ 900
$4,000
2.90
7.84
Owners Equity
Abby Ellen, capital
Total liabilities and owners equity
16-13
Income Statement
e
Incom nt
e
Statem
Retail Business
Service Business
Revenues (Sales)
Revenues
-Operating Expenses
=Net Income
- Operating Expenses
= Net Income (Profit)
16-14
16-15
Revenues
a. Gross Sales
b. Less: Sales returns and allowances
c.
Sales discounts
d. Net Sales
Cost of merchandise (goods) sold:
a. Merchandise Inventory 12/1/2004
b. Purchases
c. Less: Purchases returns and allowances $336
d. Less: Purchase discounts
204
e. Cost of net purchases
f. Cost of merchandise (goods available for sale)
g. Less: Merchandise inventory 12/31/2004
h. Cost of merchandise (goods sold)
Gross profit from sales
Operating expenses:
a. Salary
b. Insurance
c. Utilities
d. Plumbing
e.
Rent
410
f. Depreciation
g.
Total operating expenses
Net income
$ 1,082
432
$10,512
540
$22,080
1,514
$ 1,248
9,972
$11,220
1,600
$20,566
9,620
$10,946
$ 2,200
1.300
400
120
200
4,630
$ 6,316
Net purchases
(purchase less
- Ending
returns & discounts) inventory
16-16
Percent
of net
100.00
41.38
58.62
1.72
5.52
6.90
.69
14.83
43.79
10.34
33.45
10.34
23.10*
16-19
Step 2. Express
each amount as a
percent of the base
year amount
(rounded to the
nearest whole
percent)
Trend Analysis
Given (base year 2009)
2012
2011
2010
2009
$621,000
$460,000
$340,000
$420,000
Gross Profit
182,000
141,000
112,000
124,000
Net Income
48,000
41,000
22,000
38,000
Sales
Trend Analysis
2012
2011
2010
2009
Sales*
148%
110%
81%
100%
Gross Profit
147
114
90
100
Net Income
126
108
58
100
$340,000
$420,000
Ratio Analysis
A relationship of one number to another. Used
to make comparisons versus previous performance
or other companies
Profitability ratios
The companys
profitability picture
16-21
Net Income
Stockholders equity
Net sales
Total assets
Problem 16-15:
Return on equity: X = 10%
$15.2
X = 0.10 ($15.2)
X = $1.52 million
16-24
Problem 16-17:
a.
b.
16-25
Total liabilities
Total assets
Net income
Stockholders' equity
$1,768
$2,015 = 87.74%
$147
$427 = 34.43%
c.
Net sales
Total assets
$265
$2015 = 13
d.
Net income
Net sales
$147
$265 = 55.47%
Problem 16-18:
2009
Sales 98%
$3,154
$3,216
= 98.072139
= 98%
16-26
2008
2007
2006
106%
100%
98%
100%
$3,414
$3,216
$3,208
$3,216
$3,152
$3,216
$3,216
$3,216
= 106.15671
=106%
= 99.751243
= 100%
= 98.00995
= 98%
2005
=100%