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E14-13 Horizontal analysis-income statement Data for Verifine Designs, Inc. follow:
E14-13 Horizontal analysis-income statementData for Verifine Designs, Inc. follow:Verifine Designs INC- Comparative Income Statement -Years ended December 31, 2011 and 201020112010Net sales revenue$428,950$371,000Expenses:Cost of goods sold$203,850$189,350Selling and general expenses99,35093,000Other expense6,7505,000Total expenses309,950287,350Cash and cash equivalents$119,000$83,650Requirements:1.Prepare a horizontal analysis of the comparative income statement of Verifine Designs Ince. Round percentage changes to the nearest one-tenth percent (three decimal places)2.Why did 2011 net income increase by a higher percentage than net sales revenue?E14-15 Vertical analysis of a balance sheet- Eta Graphics has the following data:Eta Graphics Inc.- Balance sheet- December 31,2010AssetsTotal currents assets$41,870Property,plant and equipment, net206,870Other assets34,870Total assets$283,610LiabilitiesTotal current liabilities$47,870Long term debt107,870Total liabilities155,740Stockholder’s EquityTotal stockholders equity127,870Total liabilities and stockholders equity$283,610Requirement:1.Perform a vertical analysis of Eta’s balance sheet.P14-23A Common size statements, analysis of profitability and financial position and comparison with the industryThe Russell Department s Stores, Inc. chief executive officer has asked you to compare the company’s profit performance and financial position with the average for the industry. The CEO has given you the company’s income statement and balance sheet as well as the industry average data for retailers.Russell Department Stores Inc. Income Statement compared with Industry Average –Year ended December 31, 2010RussellIndustry AverageNet Sales$777,000100.0%Cost of goods sold523,69865.8Gross Profit253,30234.2Operating expenses162,39319.7Operating income90,90914.5Other expenses7,7700.4Net Income$83,13914.1%Russell Department Stores Inc. Balance Sheet compared with Industry Average –December 31, 2010RussellIndustry AverageCurrent Assets$3330,75070.9%Fixed Assets, net123,48023.6Intangible assets, net9,8000.8Other assets25,9704.7Total assets$490,000100.0%Current liabilities$227,36048.1%Long term liabilities111,72016.6Stockholders equity150,92035.3Total Liabilites$490,000100.0%Requirements:1.Prepare a common-size income statement and balance sheet for Russell. The first column of each statement should present Russell’s common-size statement and the second column, the industry averages.2.For the profitability analysis, compute Russell’s (a) ration of gross profit to net sales, (b0 ration of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Russells profit performance better or worse than the industry average?3.For the analysis of financial position, compute Russells (a) ration of current assets to total assets and (b)ratio of stockholders equity to total assets. Compare these ratios with the industry averages. Is Russells financial position better or worse than the industry averages?
