Reference no: EM131196451
Exercise 1
Performing horizontal analysis-income statement
Data for McCormick Designs, Inc. follow:
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MCCORMICK DESIGNS, INC.
Comparative Income Statement
Years Ended December 31, 2016 and 2015
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2016
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2015
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Net Sales Revenue
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$ 431,250
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$ 373,000
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Expenses:
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Cost of Goods Sold
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202,000
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189,000
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Selling and Administrative Expenses
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100,050
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92,550
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Other Expenses
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8,000
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2,150
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Total Expenses
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310,050
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283,700
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Net Income
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5121,200
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$ 89,300
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Instructions
1. Prepare a horizontal analysis of the comparative income statement of McCormick Designs, Inc. Round percentage changes to one decimal place.
2. Why did 2016 net income increase by a higher percentage than net sales revenue?
Exercise 2
Performing vertical analysis of a balance sheet
Tri Designs, Inc. has the following data:
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TRI DESIGNS, INC.
Comparative Balance Sheet
December 31, 2016 and 2015
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Assets
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2016
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2015
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Total Current Assets
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$ 54,950
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$ 72,250
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Property, Plant, and Equipment, Net
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250,250
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158,950
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Other Assets
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44,800
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57,800
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Total Assets
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$ 350,000
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$ 289,000
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Liabilities
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Total Current Liabilities
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$ 49,700
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$ 47,685
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Long-term Debt
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118,300
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196,520
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Total Liabilities
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168,000
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244,205
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Stockholders' Equity
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Total Stockholders' Equity
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182,000
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44,795
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| Total Liabilities and Stockholders' Equity |
$ 350,000
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$ 289,000
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Perform a vertical analysis of Tri Designs's balance sheet for each year.
Exercise 3
Computing key ratios
The financial statements of Victory's Natural Foods include the following items:
Compute the following ratios for the current year:
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Current Year
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Preceding Year
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Balance Sheet:
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Cash
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$ 20,000
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$ 24,000
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Short-term Investments
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18,000
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26,000
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Net Accounts Receivable
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50,000
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78,000
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Merchandise Inventory
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70,000
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66,000
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Prepaid Expenses
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12,000
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10,000
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Total Current Assets
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170,000
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204,000
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Total Current Liabilities
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129,000
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92,000
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Income Statement:
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Net Credit Sales
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$ 478,000
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Cost of Goods Sold
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318,000
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1. Current ratio
2. Cash ratio
3. Acid-test ratio
4. Inventory turnover
5. Days' sales in inventory
6. Days' sales in receivables
7. Gross profit percentage (assume all sales are on credit)
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