Using the two spreadsheets of different companies above, answer the following: V
ID: 2481096 • Letter: U
Question
Using the two spreadsheets of different companies above, answer the following:
Vertical analysis:
1. Compare company 1 to company 2,
A. What can you tell me about the cost of goods sold with each?
B. What does it mean?
C. What are their largest expenses?
D. Is there anything that is interesting or catches your attention on the income statement?
E. What about the balance sheet?
F. What is their largest asset?
G. Liability?
H. What does that mean to you, are they in a good position or not?
2. Take a look at these two companies: Tell me about their retained earnings, what do you think?
3. Based on vertical analysis, which company is doing better?
Horizontal analysis:
1. Income Statement:
A. What trends do you see?
B. What is happening with sales, and cost of goods sold?
C. What about operating costs?
D. Are they maintaining adequate control?
2. Balance Sheet:
A. What has happened to the cash?
B. Can you tell where the cash has gone?
C. What about property, plant and equipment? What is happening there?
D. Any clues to what is going on with the companies?
E. Take a look at liabilities, any ideas as to what is going on?
3. Ratios: Do the following ratios, and tell me what they mean.
A. Return on sales, what does the result mean?
B. Earnings per share: Again what does that mean for the shareholders?
C. Ratio of stockholders equity to total equity:
a. Is it better to have lots of equity, or liabilities?
b. Please tell me the situation with each company, and tell me which is better and why.
D. Current ration: What does the result mean?
a. What does it mean for each company?
E. Acid test ratio:
a. how is this different from the current ratio, and which would you use?
b. Tell me the result of both companies, and what they mean.
4. Inventory turnover:
A. what does this mean?
B. Calculate for each company, and interpret what it means for each.
5. Accounts receivable turnover:
A. what does this mean?
B. Calculate for each company, and interpret what it means for each.
Company A Balance Sheet Company B Balance sheet 2015 2014 2015 2014 Cash $ 69,500 $ 94,800 $ 40,500.00 $ 25,300.00 Accounts Receivable $ 22,100 $ 19,900 $ 4,200.00 $ 20,300.00 Marketable Securities $ 500 $ 500 $ - $ 7,000.00 Inventory $ 19,900 $ 17,000 $ 2,000.00 $ 11,300.00 Prepaid Expenses $ 800 $ 700 $ - $ 800.00 Supplies $ 300 $ 300 $ 300.00 $ 700.00 Total Current Assets $ 115,115 $ 135,214 $ 49,015.00 $ 67,414.00 Property Plant and Equipment $ 140,000 $ 80,000 $ 6,000.00 $ 55,000.00 Land $ 80,000 $ 50,000 $ 3,000.00 $ 25,000.00 Accumulated Depreciation $ 18,000 $ 16,500 $ 2,000.00 $ 51,000.00 Office Equipment $ 500 $ 500 $ 150.00 $ 600.00 Accumulated Depreciation $ 100 $ 50 $ 50.00 $ 300.00 Total Assets $ 315,500 $ 247,150 $ 54,100 $ 94,700 Accounts Payable 68800 48000 $ 45,200.00 $ 65,000.00 Interest Payable 550 400 $ 150.00 $ 800.00 Mortgage payable 7000 4000 $ 300.00 $ 5,000.00 Total Liabilities 76350 52400 $ 45,650.00 $ 70,800.00 Stockholders Equity Common Stock 32000 32000 $ 300.00 $ 9,000.00 Paid in capital 700 700 $ 900.00 $ 900.00 Retained earnings 206450 162050 $ 7,250.00 $ 14,000.00 Company A Income Statement Company B Income Statements Revenue Sales $ 1,115,500.00 $ 955,000.00 $ 250,000.00 $ 775,000.00 Cost of goods sold $ 560,000.00 $ 515,000.00 $ 162,500.00 $ 475,000.00 Sales Commissions $ 36,000.00 $ 28,600.00 $ 7,500.00 $ 14,250.00 Salaries $ 355,500.00 $ 335,500.00 $ 85,000.00 $ 250,000.00 Advertising $ 15,000.00 $ 11,000.00 $ - $ 15,000.00 Travel Expense $ 5,000.00 $ 5,000.00 $ - $ 7,000.00 Insurance expense $ 5,000.00 $ 4,500.00 $ 3,000.00 $ 5,000.00 Mortage expense $ 15,000.00 $ 8,000.00 $ 1,500.00 $ 7,500.00 Interest Expense $ 6,000.00 $ 3,000.00 $ 3,000.00 $ 8,000.00 Net Income $ 118,000.00 $ 44,400.00 $ (12,500.00) $ (6,750.00)Explanation / Answer
Compare company 1 to company 2,-
(a)
(b)
It means Company A cost of goods sold is less than B and even decreasing however B's ratio is not good as compare to A and becoming worse in coming years.
(c)
Cost of goods sold and salaries expenses are largest expenses.
D is there anything that is interesting or catches your attention on the income statement
Ther is no expenses in travel and advertising in 2015 in company b income statement.
Co. Year Cost of goods sold/Sales A 2015 560000/1115500 50.20% A 2014 515000/955000 53.93% B 2015 162500/250000 65.00% B 2014 475000/775000 61.29%Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.