Question

(Horizontal and Vertical Analysis) Presented below is the comparative balance sheet for Gilmour Company.

GILMOUR COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2018 AND 2017
December 31
	2018	2017
Assets
Cash	\( 180,000	\) 275,000
Accounts receivable (net)	220,000	155,000
Short-term investments	270,000	150,000
Inventories	1,060,000	980,000
Prepaid expenses	25,000	25,000
Plant & equipment	2,585,000	1,950,000
Accumulated depreciation	(1,000,000)	(750,000)
	\(3,340,000	(2,785,000)
Liabilities and Stockholders’ Equity
Accounts payable	\) 50,000	\( 75,000
Accrued expenses	170,000	200,000
Bonds payable	450,000	190,000
Common stock	2,100,000	1,770,000
Retained earnings	570,000	550,000
	\)3,340,000	(2,785,000)

Instructions

(Round to two decimal places.)

1. Of what value is the additional information provided in part (b)?

Short answer

This claim contradicts the 19.93 percent increase, making it easier for experts to identify any discrepancy.

Step-by-step solution

Meaning of Financial Analysis

The process of financial analysis refers to examining financial data to make business choices. This type of research usually requires looking at past records, future probability cash flow, and risk.

Determining the value, which is the additional information provided in part (b)

Part (b) of the statement provides an excellent analysis and breakdown of the overall change in assets and liabilitiesas well as shareholders' equity. This statement contradicts the 19.93% increase, making it easier for analysts to spot any discrepancies.

Increases in accounts receivable, short-term investments, and fixed assets explain an increase in the asset side, while an increase in bonds payable and capital stocks explains an increase in the liability side. This statement simplifies the study of year operations in general.