Question

A condensed balance sheet for Simultech Corporation and a partially completed vertical analysis are presented below.

 

Required:

1. Complete the vertical analysis by computing each missing line item as a percentage of total assets.
2-a. What percentage of Simultech’s total assets relate to inventory?
2-b. What percentage of Simultech’s total assets relate to property and equipment?
2-c. Which of these two asset groups is more significant to Simultech’s business?
3. What percentage of Simultech’s assets is financed by total stockholders' equity? By total liabilities?

Answer 1

SIMULTECH CORPORATION
Balance Sheet (summarized)
31-Jan
(in millions of U.S. dollars)
Cash and Short-Term Investments	$458	29.17	%	Current Liabilities	$434	27.64	%
Accounts Receivable	299	19.04	%	Notes Payable (long-term)	520	33.12	%
Inventories	211	13.44	%	Total Liabilities	954	60.76	%
Other Current Assets	124	7.90	%	Common Stock	119	7.58	%
Property and Equipment	28	1.78	%	Retained Earnings	497	31.66	%
Other Assets	450	28.66	%	Total Stockholders’ Equity	616	39.24	%
Total Assets	$1,570	100	%	Total Liabilities & Stockholders’ Equity	$1,570	100	%

Percentage of total assets relative to inventories = Total Assets *100 / Inventories

= (1,570/211)*100

= 744%

Percentage of total assets relate to property and eeuipment.

= Total Assets / Property and Equipment

= (1,570/28)*100

= 5607%.

Percentage of Assets financed by Equity.

=Stock holders Equity / Total Assets

= 616 / 1570 *100

= 39%.

Percentage of assets financed by debt.

=100-39% = 61%.