Assignment
I: Horizontal analysis
The comparative temporary investments and inventory balances of a company follows.
Current Year Previous Year
Temporary investments $59,280 $52,000
Inventory 70,690 76,000
Based on this information what is the amount and percentage of increase or decrease that would be shown in a balance sheet with horizontal analysis?
II: Vertical analysis of income statement
Revenue and expense data for Gresham Inc. for two recent years are as follows.
Current Year Previous Year
Sales$2,500,000 $2,350,000
Cost of goods sold 1,500,000 1,292,500
Selling expenses 300,000 376,000
Administrative expenses 375,000 305,500
Income tax expense 150,000 141,000
III: Horizontal analysis of the income statement
Income statement data for Moreno Company for two recent years ended December 31, are as follows.
Current Year Previous Year
Sales $1,120,000 $1,000,000
Cost of goods sold 971,250 875,000
Gross profits $ 148,750$ 125,000
Selling expenses 71,250 52,500
Administrative expenses 56,000 50,000
Total operating expenses$ 127,250 $ 112,500
Income before income tax $ 21,500 $ 12,500
Income tax expense 8,000 5,000
Net income$ 13,500$ 7,500
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. Round to one decimal place.
b. What conclusion can be drawn from the horizontal analysis?
IV: Nineteen measures of solvency and profitability
The comparative financial statement of Bettancort Inc. are as follows. The market price of Bettancort Inc. common stock was $71.25 on December 31, 2016
Bettancort Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 2016 and 2015
2016 2015
Retained earnings January 1 ................................................................. $2,655,000 $2,400,000
Add net income for year........................................................................ 300,000 280,000
Total .................................................................................................. $2,955,000 $2,680,000
Deduct dividends...................................................................................
On preferred stock............................................................................... $ 15,000 $ 15,000
On common stock................................................................................. 10,000 10,000
Total................................................................................................. $2,930,000 $2,655,000
Bettancort Inc.
Comparative Income Statement
For the Years Ended December 31, 2016 and 2015
2016 2015
Sales............................................................................................................ $1,200,000 $1,000,000
Cost of goods sold....................................................................................... 500,000 475,000
Gross profit................................................................................................ $ 700,000 $ 525,000
Selling expenses........................................................................................... $ 240,000 $ 200,000
Administrative expenses................................................................................ 180,000 150,000
Total operating expenses.............................................................................. $ 420,000 $ 350,000
Income from operations................................................................................ $ 280,000 $ 175,000
Other income interest................................................................................... 166,000 225,000
$ 466,000 $ 400,000
Other expense (interest)................................................................................ 66,000 60,000
Income before income tax............................................................................... $ 380,000 $ 340,000
Income tax expense....................................................................................... 80,000 60,000
Net Income.................................................................................................... $ 300,000 $ 280,000
Bettancort Inc.
Comparative Balance Sheet
December 31, 2016 and 2015
Dec. 31,2016 Dec. 31, 2015
Assets
Current assets:
Cash......................................................................................................$ 450,000 $ 400,000
Marketable securities...............................................................................300,000 260,000
Accounts receivable (net)..........................................................................130,000 110,000
Inventories..............................................................................................67,000 58,000
Prepaid expenses.....................................................................................153,000 139,000
Total current assets........................................................................$1,100,000 $ 967,000
Long-term investments............................................................................2,350,000 2,200,000
Property, plant, and equipment (net).........................................................1,320,000 1,188,000
Total assets............................................................................................$4,770,000 $4,355,000
Liabilities
Current liabilities......................................................................................$ 440,000 $ 400,000
Long-term liabilities
Mortgage note payable, 8%, due 2021...............................................100,000 $ 0
Bonds payable, 5%, due 2017...........................................................1,000,000 1,000,000
Total long-term liabilities..............................................................$1,100,000 $1,000,000
Total liabilities..........................................................................................$1,540,000 $1,400,000
Stockholders' Equity
Preferred $0.75 stock, $10 par..................................................................$ 200,000 $ 200,000
Common stock $10 par............................................................................100,000 100,000
Retained earnings....................................................................................2,930,000 2,655,000
Total stockholders' equity....................................................................$ 3,230,000 $2,955,000
Total liabilities and stockholders' equity......................................................$ 4,770,000 $4,355,000
Instructions:
Determine the following measures for 2016, rounding to one decimal place:
1. Working capital
2. Current ratio
3. Quick ratio
4. Accounts receivable turnover
5. Number of days' sales in receivables
6. Inventory turnover
7. Number of days' sales in inventory
8. Ratio of fixed assets to long-term liabilities
9. Ratio of liabilities to stockholders' equity
10. Number of times interest charges are earned
11. Number of times preferred dividends are earned
12. Ratio of sales to assets
13. Rate earned on total assets
14. Rate earned on stockholders' equity
15. Rate earned on common stockholders' equity
16. Earnings per share on common stock
17. Price-earnings ratio
18. Dividends per share of common stock
19. Dividend yield.