Analyzing Financial Statements Using Ratios andPercentage Changes
The comparative financial statements prepared at December 31,2004, for Soon Company showed the following summarized data:
Increase (Decrease)
2004 over 2003
2004 2003 Amount Percentage
Income Statement
Sales revenue* $222,000 $185,000
Cost of goods sold 127,650 111,000
Gross profit 94,350 74,000
Operating expenses 39,600 33,730
Interest expense 4,000 3,270
Income before income taxes 50,750 37,000
Income tax expense (30%) 15,225 11,100
Net income $ 35,525 $25,900
Balance Sheet
Cash $ 40,000 $38,000
Accounts receivable (net) 18,500 16,000
Inventory 25,000 22,000
Property and equipment (net) 127,000 119,000
Total assets $210,500 $195,000
Accounts payable $ 27,000 $25,000
Income taxes payable 3,000 2,800
Note payable, long-term 75,500 92,200
Total liabilities 105,500 120,000
Capital stock (par $1) 25,000 25,000
Retained earnings 80,000 50,000
Total liabilities and
stockholders' equity $210,500 $195,000
One-half of all sales are on credit.
During 2004, cash dividends amounting to $5,525 weredeclared and paid.
Required:
1. Complete the two final columns shown besideeach item in Soon Company's comparative financialstatements.
2. Does anything significant jump out at youfrom the year-over-year analysis?