Question

Be Copy - te Format Painter BIU- - A Es Merge & Center - $ - % .00 000 Neutral Calculatio Conditional Format as Good Formatting Table Clipboard Font Alignment Number Styles 8 f A J KL M N 0 B с D E F G H 1 Assignment 3.4 Exercises Problem 9: Financial Statement Analysis 10 Points Use the financial information provided below to perform both a vertical and horizontal analysis of French Corp. 10 11 12 13 14 15 16 17 18 Item 2018 2019 Cash $ 150,000 $ 85,000 Accounts Receivable $ 580,000 $ 630,000 Inventory $ 360,000 $ 430,000 Accounts Payable $ 410,000 $ 625,000 Net Plant and Equipment $1,250,000 $1,490,000 Long-Term Debt $1,470,000 $1,530,000 Common Stock and Paid-in Surplus $ 400,000 $400,000 Retained Earnings $ 60,000 $ 80,000 Net Sales $2,150,000 $2,550,000 Cost of Goods Sold $1,350,000 $1,590,000 Operating Expenses $ 125,000 $ 165,000 Depreciation Expense $ 240,000 $ 250,000 Management Salaries $ 220,000 $ 330,000 Interest $ 140,000 $ 165,000 Income Tax $ 15,500 $ 13,500 a) Prepare the 2018 and 2019 common-sized Balance Sheets b) Prepare the 2018 and 2019 common-sized Income Statements. C) Using 2018 as the base year, perform a horizontal analysis on the Balance Sheets d) Using 2018 as the base year, perform a horizontal analysis on the Income Statements E) What do you observe? Are there any interesting trends or changes? (answer with a few sentences) Create your Original Solution Below - Be sure to show all calculations and clearly indicate answers. 19 20 21 22 23 24 25 LU 27 28 29 30 31 32 33 34 35 36

a prepare the 2018 and 2019 common sized balance sheets
b prepare the 2018 and 2019 common sized income statements
c using 2018 as the base year, perform a horizontal analysis on the balance sheets
d using 2018 as the base year, perform a horizontal analysis on the income statements
e what do you observe? are there any interesting trends or changes?

Answer 1

2019 37% (A) 2018 and 2019 Common size BALANCE SHEET 2018 Amount Percent Amount Percent ASSETS Current Assets: Cash& cash equiv 85000 3.23% 150000 6.41% Accounts receivable 630000 23.91% 580000 24.79% Inventory 430000 16.32% 360000 15.38% Total current Assets 1145000 43.45% 1090000 46.58% Net Plant & equipment 1490000 56.55% 1250000 53.42% 1 Total Assets: 2635000 100.00% 2340000 100% 2 3 LIABILITIES AND SHAREHOLDER'S EQUITY 4 Current Liabilities: 5 Accounts payable 625000 23.72% 410000 17.52% 6 Long Term debt 1530000 58.06% 1470000 62.82% 7 Total liab 2155000 81.78% 1880000 80.34% 3 Shareholder's equity: 9 Common stock and paid in surplus 400000 15.18% 400000 17.09% 0 Retained earnings 60000 80000 1 Total liabilities and sharholders equity 2635000 100% 2340000 100% (B) 2018 and 2019 Common size income statement 2019 2018 Amount Percent Amount Percent Revenue 2550000 100% 2150000 100% Cost of goods sold 1590000 62% 1350000 63% Gross profit 960000 38% 800000 Less: expenses Operating expense 165000 6% 125000 6% Depreciation & amortisation 250000 10% 240000 11% Management salaries 330000 13% 220000 10% EBIT 215000 8% 215000 10% (-) Interest 165000 6.47% 140000 6.51% EBT 50000 1.96% 75000 3.49% (-) tax expense 13500 0.85% 15500 1% Net income 36500 1% 59500 3%

(D) Horizontal Analysis 2019 2018 Change % change 2550000 2150000 400000 18.60% 1590000 1350000 240000 17.78% 960000 800000 160000 20.00% 125000 22 23 © Horizontal Analysis 24 25 2019 2018 Change % change 26 ASSETS 27 Current Assets: 28 Cash& cash equiv 85000 150000 -65000 -43.33% 29 Accounts receivable 630000 580000 50000 8.62% 30 Inventory 430000 360000 70000 19.44% 31 Total current Assets 1145000 1090000 55000 5.05% 32 Net Plant & equipment 1490000 1250000 240000 19.20% 33 Total Assets: 2635000 2340000 295000 12.61% 34 35 LIABILITIES AND SHAREHOLDER'S EQUITY 36 Current Liabilities: 37 Accounts payable 625000 410000 215000 52.44% 38 Long Term debt 1530000 1470000 60000 4.08% 39 Total liab 2155000 1880000 275000 14.63% 40 Shareholder's equity: 41 Common stock and paid in surplus 400000 400000 0 0.00% 42 Retained earnings 60000 80000 -20000 -25.00% 43 Total liabilities and sharholders equity 2635000 2340000 295000 12.61% 44 Revenue Cost of goods sold Gross profit Less: expenses Operating expense Depreciation & amortisation Management salaries EBIT (-) Interest EBT (-) tax expense Net income 165000 250000 330000 215000 240000 220000 215000 40000 32.00% 10000 4.17% 110000 50.00% 0 0.00% 25000 17.86% -25000 -33.33% -2000 -12.90% -23000 -38.66% 140000 165000 50000 75000 13500 36500 15500 59500