Question

perform a horizontal analysis of the MCL income statement (table 4-7) for 2011 and 2012. wrote an explanation of this analysis.

40 Moderately Large Corporation Consolidaed Balance Sheet (in thousands except share data) Fiscal Year Ended T he Dec. 31, 2013 Dec. 31, 2012 ASSETS Current assets: Cash and cash equivalents $1,369 Accounts receivable, net $1,427 1,008 876 Inventories 1,489 481 Prepaid expenses and other current assets 157 126 Deferred income taxes, net 44 Total current assets 4,066 2,950 Property, plant and equipment, net 3,137 2,287 Other assets 168 161 TOTAL ASSETS $7,371 $5,398 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $429 $242 Accrued compensation and related costs dicht 104 98 Accrued taxes 132 141 Current portion of long-term debt 89 82 Total current liabilities 754 563 Long-term debt 2,630 151,830 Total liabilities 3,384 2,392 Shareholders' equity: Sad Common stock ($0.1 par value)-authorized, 350 350 4,000,000 shares; issued and outstanding, 3,500,000 Paid-in capital in excess of par 2,4152 ,415 Retained earnings 1,222 Total shareholders' equity 3,987 3,006 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,371 $5,398 241

Answer 1

Please find attached table showing "Horizontal Analysis" of Income statement between year 2012 and year 2011:

Horizontal Analysis Dec 31, 2012 Dec 31, 2011 Diff in Amt Diff in % Analysis A CEA-B C/B Net Revenues Cash Sales Credit Sales 2,751.00 5,258.00 2,456.00 4,572.00 295.00 686.00 Total Net Revenues Cost of Sales 8,009.00 4,405.00 7,028.00 3,725.00 981.00 680.00 Gross Profit Salaries 3,604.00 1,183.00 3,303.00 1,112.00 301.00 71.00 Insurance 116.00 93.00 23.00 12.01% 15.00% Total sales has increased by 13.96% in year 2012 as compared to year 2011, due to 13.96% higher cost of sales 18.26% Increase in sales requires increased cost of sales % increase in cost of sales is more than % increase in sales, which contributes to 9.11% lesser increase in gross profit 6.38% Increase in Salaries may be due to increased employees to meet with higher sales Increase in Insurance may be due to increase in assets and employees, in order to 24.73% meet with higher sales. Increase in Depreciation may be due to increase in assets in order to meet with higher 10.66% sales. 32.69% Increase due to increase in sales and cost of sales 13.40% 4.64% 0.00% 4.67% 4.63% 4.70% Depreciation General and Administrative Expenses Subtotal operating expenses Operating income Interest Expense Earnings before taxes Income taxes Net Earnings Per common share Net Earnings Basic Net Earnings Diluted Weighted Average Shares Outstanding Basic Diluted 135.00 479.00 1,913.00 1,691.00 11.00 1,680.00 588.00 1,092.00 122.00 361.00 1,687.00 1,616.00 11.00 1,605.00 562.00 1,043.00 13.00 118.00 226.00 75.00 - 75.00 26.00 49.00 0.31 0.27 0.30 0.26 3,500.00 4,000.00 3,500.00 4,000.00