Assignment Choice #: Ratios, Common-Size Statements, and Trend Analysis
Complete the following exercise. Fill in the Excel spreadsheet titled Korbin Company provided via the link at the bottom of the page to provide your answers to parts 1 and 2. Then paste the Excel data into a Word document on which you can also write the answer to part 3.
The Korbin Company comparative income statements and balance sheets for years 20X4, 20X3, and 20X2 included the following items:
Korbin Company - Comparative Income Statements
For years ended December 31, 20X4, 20X3, and 20X2
| |
20X4 |
20X3 |
20X2 |
| Sales |
$555,000 |
$340,000 |
$278,000 |
| Cost of goods sold |
$283,500 |
$212,500 |
$153,900 |
| Gross profit |
$271,500 |
$127,500 |
$124,100 |
| Selling expenses |
$102,900 |
$ 46,920 |
$ 50,800 |
| Admin expenses |
$ 50,668 |
$ 29,920 |
$ 22,800 |
| Total expenses |
$153,568 |
$ 76,840 |
$ 73,600 |
| Income before taxes |
$117,932 |
$ 50,660 |
$ 50,500 |
| Income taxes |
$ 40,800 |
$ 10,370 |
$ 15,670 |
| Net income |
$ 77,132 |
$ 40,290 |
$ 34,830 |
Korbin Company - Comparative Balance Sheets
At December 31, 20X4, 20X3, and 20X2
| Assets: |
20X4 |
20X3 |
20X2 |
| Current assets |
$ 52,390 |
$ 37,924 |
$ 51,748 |
| Long-term investments |
$0 |
$ 500 |
$ 3,950 |
| Plant assets, net |
$100,000 |
$ 96,000 |
$ 60,000 |
| Total assets |
$152,390 |
$134,424 |
$115,698 |
| Liabilities and Equity: |
20X4 |
20X3 |
20X2 |
| Current liabilities |
$ 22,800 |
$ 19,960 |
$ 20,300 |
| Common stock |
$ 72,000 |
$ 72,000 |
$ 60,000 |
| Other paid in capital |
$ 9,000 |
$ 9,000 |
$ 6,000 |
| Retained earnings |
$ 48,590 |
$ 33,464 |
$ 29,398 |
| Total Liabilities+Equity |
$152,390 |
$134,424 |
$115,698 |
Required:
1. Express the income statement data in common size percentages. Round percentages to two decimal places.
2. Express the balance sheet data in trend percentages with 20X2 as the base year. Round percentages to the nearest whole number (zero decimal places).
3. Provide a statement between 200 and 300 words in length for senior management in which you comment on the significant relationships revealed by the ratio and percentages computed in the above two questions plus calculate one significant liquidity, solvency, and profitability ratio as required to provide the status of the company based on the analysis of performance measures.