WRD_ch17_SV - 11-117-1Financial Statement Analysis17Student

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Unformatted text preview: 11-117-1Financial Statement Analysis17Student Version11-217-21Describe basic financial statement analytical methods.17-211-317-3Horizontal AnalysisThe percentage analysis of increases and decreases in related items using comparative financial statements is called horizontal analysis.111-417-41Horizontal Analysis: Horizontal Analysis: Difference$17,000Base year (2009)$533,000= 3.2%Exhibit 1Comparative Balance SheetHorizontal Analysis11-517-5Horizontal Analysis: Horizontal Analysis: Difference$25,800Base year (2009)$64,700= 39.9%1Comparative Schedule of Current AssetsHorizontal AnalysisExhibit 211-617-6Horizontal Analysis:Horizontal Analysis:Increase amount$296,500Base year (2009) $1,234,000= 24.0%1Comparative Income StatementHorizontal AnalysisExhibit 311-717-7Comparative Retained Earnings StatementHorizontal AnalysisHorizontal Analysis:Horizontal Analysis:Increase amount$37,500Base year (2009)$100,000= 37.5%1Exhibit 411-817-8Vertical AnalysisA percentage analysis used to show the relationship of each component to the total within a single statement is called vertical analysis.111-917-9In a vertical analysis of the balance sheet, each asset item is stated as a percent of the total assets. Each liability and stockholders equity item is stated as a percent of the total liabilities and stockholders equity.Vertical Analysis of Balance Sheet111-1017-10Compar-ative Balance SheetVertical AnalysisVertical Analysis: Vertical Analysis: Current assets $550,000Total assets$1,139,500= 48.3%1Exhibit 511-1117-11In a vertical analysis of the income statement, each item is stated as a percent of net sales.Vertical Analysis of the Income Statement111-1217-12Vertical Analysis: Vertical Analysis: Selling expenses $191,000Net sales $1,498,000= 12.8%1Comparative Income StatementVertical AnalysisExhibit 611-1317-13Common-Size StatementsIn acommon-sized statements, all items are expressed as a percentage. Common-sized statements are useful in comparing the current period with prior periods, individual businesses, or one business with with industry percentages.111-1417-14Common-Sized Income Statement1Exhibit 711-1517-1517-152Use financial statement analysis to assess the solvency of a business.11-1617-16Working CapitalThe excess of current assets of a business over its current liabilities is called working capital. The working capital is often used in evaluating a companys ability to pay current liabilities....
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WRD_ch17_SV - 11-117-1Financial Statement Analysis17Student

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