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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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BuyFindarrow_forward

Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Segment revenue horizontal and vertical analyses

The comparative regional segment revenues for McDonald’s Corporation are as follows:

Chapter 5, Problem 5.27EX, Segment revenue horizontal and vertical analyses The comparative regional segment revenues for

* APMEA = Asia/Pacific, Middle East, Africa

a. Provide a horizontal analysis of the regional segment revenues using the prior year as the base year. Round whole percents to one decimal place.

b. Provide a vertical analysis of the regional segment revenues for both years. Round whole percents to one decimal place.

c. What conclusions can be drawn from your analyses?

(a)

To determine

Segment Analysis

Business can be classified by regions, products or services, types of customers and more; each classification is treated as one segment of the business. Revenues earn from different segments individually, are called segment revenue. Segment revenues are determined from the invoiced data entered in the accounting system. Segment analysis is done to analyze the contribution of different segments to the total operating performance of the company. It is done with the help of horizontal and vertical comparisons.

Horizontal Analysis

This analysis is done to show the trend of various components in financial statements over a period of time. The earliest period is used as the base period and components of financial statements of later periods are compared with the components of the base period.

Vertical analysis

Vertical analysis is the method of financial statement analysis, and it is useful to evaluating a company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing the each item on a financial statement with a total amount from the same statement.

To prepare:  Horizontal analysis of the revenue of M Corporation from different brand of restaurants

Explanation

The Horizontal analysis of the revenue earned from different brand restaurants is as follows:

M Corporation
Horizontal Analysis

Recent Year

(in millions)

 Prior Year

 (in millions)

Increase/Decrease
Amount Percent (%)
U $8,814 $8,528 $286 3...

(b)

To determine

To prepare:  Vertical analysis of the revenue earned from different brand restaurants.

(c)

To determine

To draw: The conclusion from the analysis.

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