Question

2. Perform a 2019 vertical analysis and a 2018-2019 horizontal analysis of the balance sheets for DMZ, LLC provided below. What areas of concern, if any do these analyses highlight? Explain your answer. DMZ, LLC Balance Sheets As of December 31, 2018, and December 31, 2019 2018 2019 28,421 Cash 1,274 333,558 Accounts receivable 225,019 Inventory 319,887 321,006 3,750 Prepaid insurance 3.500 Total current assets 576,827 659,588 Equipment 385,000 385,000 Less: Accumulated depreciation 21,150 363,850 63,450 321,550 Net fixed assets $940,677 $981,138 Total assets $331,822 $401,693 Accounts payable Wages and payroll taxes payable 25,889 26,145 20,085 Short-term portion of mortgage payable 21,014 Total current liabilities 378,725 447,923 Mortgage payable 245,000 224,915 Total liabilities 623,725 672,838 Owner's equity 316,952 308,300 Total liabilities and owner's equity $940,677 $981,138

Answer 1

Correct Answer:

DMZ, LLC
Comparative Balance sheets
as of December 31, 2018 and 2019
	A	B	C=B-A	D=C/A*100
	2018	2019	$ change	% change
Cash	$         28,421.00	$          1,274.00	$        (27,147.00)	-96%
Accounts receivable	$       225,019.00	$     333,558.00	$        108,539.00	48%
inventory	$       319,887.00	$     321,006.00	$             1,119.00	0%
prepaid insurance	$            3,500.00	$          3,750.00	$                250.00	7%
total current assets	$       576,827.00	$     659,588.00	$          82,761.00	14%
Equipment	$       385,000.00	$     385,000.00	$                          -	0%
Less: Accumulated depreciation	$         21,150.00	$       63,450.00	$          42,300.00	200%
Net fixed Assets	$       363,850.00	$     321,550.00	$        (42,300.00)	-12%
Total Assets	$      940,677.00	$     981,138.00	$          40,461.00	4%
Accounts payable	$       331,822.00	$     401,693.00	$          69,871.00	21%
Wages and payroll taxes payable	$         25,889.00	$       26,145.00	$                256.00	1%
Short term portion of mortgage payable	$         21,014.00	$       20,085.00	$              (929.00)	-4%
Total current liabilities	$       378,725.00	$     447,923.00	$          69,198.00	18%
Mortgage payable	$       245,000.00	$     224,915.00	$        (20,085.00)	-8%
Total liabilities	$       623,725.00	$     672,838.00	$          49,113.00	8%
owner's equity	$       316,952.00	$     308,300.00	$          (8,652.00)	-3%
Total Liabilities and owner's equity	$       940,677.00	$     981,138.00	$          40,461.00	4%

DMZ, LLC
Common-Size Balance sheets
as of December 31, 2018 and 2019
	A	B	A/TOTAL ASSETS *100	B/TOTAL ASSETS *100
	2018	2019	2018	2019
Cash	$         28,421.00	$          1,274.00	3.02%	0.13%
Accounts receivable	$       225,019.00	$     333,558.00	23.92%	34.00%
inventory	$       319,887.00	$     321,006.00	34.01%	32.72%
prepaid insurance	$            3,500.00	$          3,750.00	0.37%	0.38%
total current assets	$       576,827.00	$     659,588.00	61.32%	67.23%
			0.00%	0.00%
Equipment	$       385,000.00	$     385,000.00	40.93%	39.24%
Less: Accumulated depreciation	$         21,150.00	$       63,450.00	2.25%	6.47%
Net fixed Assets	$       363,850.00	$     321,550.00	38.68%	32.77%
Total Assets	$       940,677.00	$     981,138.00	100.00%	100.00%
			0.00%	0.00%
Accounts payable	$       331,822.00	$     401,693.00	35.27%	40.94%
Wages and payroll taxes payable	$         25,889.00	$       26,145.00	2.75%	2.66%
Short term portion of mortgage payable	$         21,014.00	$       20,085.00	2.23%	2.05%
Total current liabilities	$       378,725.00	$     447,923.00	40.26%	45.65%
Mortgage payable	$       245,000.00	$     224,915.00	26.05%	22.92%
Total liabilities	$       623,725.00	$     672,838.00	66.31%	68.58%
owner's equity	$       316,952.00	$     308,300.00	33.69%	31.42%
Total Liabilities and owner's equity	$       940,677.00	$     981,138.00	100.00%	100.00%

End of answer.

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