Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
14th Edition
ISBN: 9781337541398
Author: Carl Warren; James M. Reeve; Jonathan Duchac
Publisher: Cengage Learning
Question
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Chapter 6, Problem 4ADM

A.

To determine

Vertical analysis

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

EBITDA:

EBITA is operating income that is expressed by adding back depreciation and amortization expenses. This amount termed as Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA). In the EBITDA calculation, fixed expenses and non-cash items are not considered.

To prepare: A vertical analysis of the sales as a percent of total sales for the five segments.

B.

To determine

To interpret: The vertical analysis of the segment sale of Company LM.

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

E.

To determine

To interpret: The analysis in EBITDA margin calculated in Part D.

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Chapter 6 Solutions

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