Chapter 15: Q3RQ (page 835)
Question: What is horizontal analysis, and how is a percentage change computed?
Answer
It was used for the analysis of horizontal data over the last years to make decisions.
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Briefly describe the ratios that can be used to evaluate a company’s profitability.
The Klein Department Stores, Inc. chief executive officer (CEO) has asked you tocompare the company’s profit performance and financial position with the averages 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.
Requirements
1.Prepare a vertical analysis for Klein for both its income statement and balance sheet.
2.Compare the company’s profit performance and financial position with the averagefor the industry.
Traditional Mills’s balance sheet appears as follows (amounts in thousands):
Use the following ratio data to complete Traditional Mills’s balance sheet.
Current ratio is 0.72.
2. Acid-test ratio is 0.36.
Computing inventory, gross profit, and receivables ratios
Requirements
1. Compute the inventory turnover, days’ sales in inventory, and gross profit
percentage for Accel’s Companies for 2018.
2. Compute days’ sales in receivables during 2018. Round intermediate calculations to
three decimal places. Assume all sales were on account.
3. What do these ratios say about Accel’s Companies’ ability to sell inventory and
collect receivables?
Theta Designs, Inc. has the following data:
| Theta Designs INC | ||
| Vertical Analysis | ||
| For the year ended December 31, 2017, and 2018 | ||
Assets | 2018 (\() | 2017 (\)) |
Total current assets | 25,000 | 73,440 |
Property, Plant and Equipment, Net | 153,600 | 168,300 |
Other Assets | 21,400 | 64,260 |
Total Assets | 200,000 | 306,000 |
Liabilities | ||
Total current liabilities | 27,600 | 49,266 |
Long term debt | 72,400 | 208,998 |
Total Liabilities | 100,000 | 258,264 |
Stockholders’ Equity | ||
Total stockholders’ Equity | 100,000 | 47,736 |
Total liabilities and stockholders’ equity | 200,000 | 306,000 |
Perform a vertical analysis of Theta Designs’s balance sheet for each year.
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