MANAGERIAL ACCOUNTING >C<
3rd Edition
ISBN: 9781259948503
Author: Whitecotton
Publisher: MCG CUSTOM
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 4.3GBP
To determine
Introduction:
Vertical analysis help to express each financial statement line item as a percentage of the base year.
To state:
Whether there is an increase or decrease in the net profit margin of the company.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Vertical analysis
Two income statements for Cornea Company follow:
Cornea Company
Income Statements
For the Years Ended December 31
20Y9
20Y8
Fees earned
$1,570,000
$1,300,000
Expenses
(832,100)
(780,000)
Net income
$737,900
$520,000
Required:
a. Prepare a vertical analysis of Cornea Company’s income statements. If required, round your percentage to the nearest whole number.
Cornea Company
Income Statements
For the Years Ended December 31
20Y9
20Y8
Amount
Percent
Amount
Percent
Fees earned
$1,570,000
%
$1,300,000
%
Expenses
(832,100)
%
(780,000)
%
Operating income
$737,900
%
$520,000
%
b. Does the vertical analysis indicate a favorable or an unfavorable trend?
Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8
20Y7
20Y6
20Y5
20Y4
Net income
$1,078,700
$929,900
$781,400
$667,900
$566,000
Interest expense
366,800
334,800
289,100
220,400
175,500
Income tax expense
345,184
260,372
218,792
173,654
135,840
Total assets (ending balance)
8,226,651
8,779,231
6,276,721
6,620,869
5,020,826
Total stockholders' equity (ending balance)
2,543,681
3,148,667
2,003,133
2,553,135
1,531,881
Average total assets
8,502,941
7,527,976
6,448,795
5,517,391
4,722,930
Average stockholders' equity
2,846,174
2,575,900
2,278,134
2,042,508
1,808,307
You have been asked to evaluate the historical performance of the company over the last five years.
Selected industry ratios have remained relatively steady at the following levels for the last five years:…
Solvency and Profitability Trend Analysis
Addai Company has provided the following comparative information:
20Y8
20Y7
20Y6
20Y5
20Y4
Net income
$1,078,700
$929,900
$781,400
$667,900
$566,000
Interest expense
366,800
334,800
289,100
220,400
175,500
Income tax expense
345,184
260,372
218,792
173,654
135,840
Total assets (ending balance)
8,226,651
8,779,231
6,276,721
6,620,869
5,020,826
Total stockholders' equity (ending balance)
2,543,681
3,148,667
2,003,133
2,553,135
1,531,881
Average total assets
8,502,941
7,527,976
6,448,795
5,517,391
4,722,930
Average stockholders' equity
2,846,174
2,575,900
2,278,134
2,042,508
1,808,307
You have been asked to evaluate the historical performance of the company over the last five years.
Selected industry ratios have remained relatively steady at the following levels for the last five years:…
Chapter 13 Solutions
MANAGERIAL ACCOUNTING >C<
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?
Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Why are some analyses called horizontal and others...Ch. 13 - Slow Cellar’s current ratio increased from 1.2 to...Ch. 13 - From last year to this year. Colossal Company’s...Ch. 13 - From last year to this year, Berry Barn reported...Ch. 13 - Prob. 10Q
Ch. 13 - Prob. 1MCCh. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Prob. 4MCCh. 13 - Prob. 5MCCh. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - Prob. 8MCCh. 13 - Prob. 9MCCh. 13 - Prob. 1MECh. 13 - Prob. 2MECh. 13 - Prob. 3MECh. 13 - Prob. 4MECh. 13 - Prob. 5MECh. 13 - Prob. 6MECh. 13 - Prob. 7MECh. 13 - Prob. 8MECh. 13 - Prob. 9MECh. 13 - Prob. 10MECh. 13 - Prob. 11MECh. 13 - Prob. 12MECh. 13 - Prob. 13MECh. 13 - Prob. 14MECh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Computing and Interpreting Liquidity Ratios...Ch. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Analyzing the Impact of Selected Transactions on...Ch. 13 - Prob. 15ECh. 13 - Prob. 1.1GAPCh. 13 - Prob. 1.2GAPCh. 13 - Prob. 2.1GAPCh. 13 - Prob. 2.2GAPCh. 13 - Prob. 2.3GAPCh. 13 - Prob. 2.4GAPCh. 13 - Prob. 2.5GAPCh. 13 - Prob. 2.6GAPCh. 13 - Prob. 2.7GAPCh. 13 - Prob. 2.8GAPCh. 13 - Prob. 3.1GAPCh. 13 - Prob. 3.2GAPCh. 13 - Prob. 3.3GAPCh. 13 - Prob. 4.1GAPCh. 13 - Prob. 4.2GAPCh. 13 - Prob. 4.3GAPCh. 13 - Prob. 5.1GAPCh. 13 - Prob. 5.2GAPCh. 13 - Prob. 5.3GAPCh. 13 - Prob. 5.4GAPCh. 13 - Prob. 6.1GAPCh. 13 - Prob. 6.2GAPCh. 13 - Prob. 7GAPCh. 13 - Prob. 1.1GBPCh. 13 - Prob. 1.2GBPCh. 13 - Prob. 2.1GBPCh. 13 - Prob. 2.2GBPCh. 13 - Prob. 2.3GBPCh. 13 - Prob. 2.4GBPCh. 13 - Prob. 2.5GBPCh. 13 - Prob. 2.6GBPCh. 13 - Prob. 2.7GBPCh. 13 - Prob. 2.8GBPCh. 13 - Prob. 3.1GBPCh. 13 - Prob. 3.2GBPCh. 13 - Prob. 3.3GBPCh. 13 - Prob. 4.1GBPCh. 13 - Prob. 4.2GBPCh. 13 - Prob. 4.3GBPCh. 13 - Prob. 5.1GBPCh. 13 - Prob. 5.2GBPCh. 13 - Prob. 5.3GBPCh. 13 - Prob. 5.4GBPCh. 13 - Prob. 6.1GBPCh. 13 - Prob. 6.2GBPCh. 13 - Prob. 7GBP
Knowledge Booster
Similar questions
- Horizontal Analysis of Income Statements consolidated income statements for Winged Manufacturing follow. Required: 1. Prepare common size income statements for horizontal analysis (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above. 2. CONCEPTUAL CONNECTION Explain why net income decreased in 2018 and increased in 2019.arrow_forwardSolvency and Profitability Trend Analysis (Graph Picture from A-D is on the buttom for references) Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders’ equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate…arrow_forwardVertical analysis Two income statements for Cornea Company follow: Cornea Company Income Statements For the Years Ended December 31 20Y9 20Y8 Fees earned $1,560,000 $1,360,000 Expenses (748,800) (788,800) Net income $811,200 $571,200 Required: a. Prepare a vertical analysis of Cornea Company’s income statements. If required, round your percentage to the nearest whole number. Cornea Company Income Statements For the Years Ended December 31 20Y9 20Y8 Amount Percent Amount Percent Fees earned $1,560,000 fill in the blank 1 % $1,360,000 fill in the blank 2% Expenses (748,800) fill in the blank 3 % (788,800) fill in the blank 4% Operating income $811,200 fill in the blank 5 % $571,200 fill in the blank 6% b. Does the vertical analysis indicate a favorable or an unfavorable trend?arrow_forward
- COMPANY A INCOME STATEMENT: VERTICAL ANALYSIS COMPANY A COMPANY B SALES REVENUE 100% 100% LESS: COST OF GOOD SOLD 62.40% 71.20% GROSS PROFIT 37.60% 28.80% LESS: OPERATING EXPENSES 18.20% 16.10% OPERATING INCOME 19.40% 12.70% LESS: INTEREST EXPENSE 1.98% 1.60% INCOME BEFORE INCOME TAXES 17.42% 11.10% LESS: INCOME TAX EXPENSE 3.40% 2.98% NET INCOME 14.02% 8.12% using vertical analysis, assess the financial performance of Company A & B with comparison.arrow_forward9 - The income statement of a Business for the period 2019 is as follows: 31.12.2019 % Gross sales 45.200 TL 102.72 Discounts From Sales 1.200 TL 2.72 Net Sales 44,000 TL 100.00 Cost of sales 12.500 TL 28.41 Gross Profit on Sales 31,500 TL 71.59 This table was prepared according to which of the following analysis methods? a) Technical analysis B) Analysis with Vertical Percentage Method NS) Ratio Analysis D) Comparative Tables Analysis TO) Trend Percentages Analysisarrow_forwardSolvency and Profitability Trend Analysis Crosby Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $5,571,720 $3,714,480 $2,772,000 $1,848,000 $1,400,000 Interest expense 1,052,060 891,576 768,600 610,000 500,000 Income tax expense 1,225,572 845,222 640,320 441,600 320,000 Total assets (ending balance) 29,378,491 22,598,839 17,120,333 12,588,480 10,152,000 Total stockholders’ equity (ending balance) 18,706,200 13,134,480 9,420,000 6,648,000 4,800,000 Average total assets 25,988,665 19,859,586 14,854,406 11,370,240 8,676,000 Average total stockholders' equity 15,920,340 11,277,240 8,034,000 5,724,000 4,100,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4–20Y8…arrow_forward
- Solvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders’ equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4–20Y8 Return on total assets 28%…arrow_forwardSolvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders’ equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4–20Y8 Return on total assets 28%…arrow_forwardSolvency and Profitability Trend Analysis Addai Company has provided the following comparative information: 20Y8 20Y7 20Y6 20Y5 20Y4 Net income $273,406 $367,976 $631,176 $884,000 $800,000 Interest expense 616,047 572,003 528,165 495,000 440,000 Income tax expense 31,749 53,560 106,720 160,000 200,000 Total assets (ending balance) 4,417,178 4,124,350 3,732,443 3,338,500 2,750,000 Total stockholders’ equity (ending balance) 3,706,557 3,433,152 3,065,176 2,434,000 1,550,000 Average total assets 4,270,764 3,928,396 3,535,472 3,044,250 2,475,000 Average total stockholders' equity 3,569,855 3,249,164 2,749,588 1,992,000 1,150,000 You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years: 20Y4–20Y8 Return on total assets 28%…arrow_forward
- Profit Margin and Debt Ratio Assume you are given the following relationships for the Haslam Corporation: Sales/total assets 1.5 Return on assets (ROA) 4% Return on equity (ROE) 7% Calculate Haslam's profit margin and liabilities-to-assets ratio. Do not round intermediate calculations. Round your answers to two decimal places. Profit margin: _______ % Liabilities-to-assets ratio: ______% Suppose half of its liabilities are in the form of debt. Calculate the debt-to-assets ratio. Do not round intermediate calculations. Round your answer to two decimal places. _______%arrow_forwardPerforming horizontal analysis—income statement Data for Mulberry Designs, Inc. follow: Requirements Prepare a horizontal analysis of the comparative income statement of Mulberry Designs, Inc. Round percentage changes to one decimal place. Why did 2018 net income increase by a higher percentage than net sales revenue?arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning
Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning