Question;E14-13 Horizontal analysis-income statementData for Verifine Designs, Inc. follow:Verifine Designs INC- Comparative Income Statement -Years ended December 31, 2011 and 20102011 2010Net sales revenue $428,950 $371,000Expenses: Cost of goods sold $203,850 $189,350Selling and general expenses 99,350 93,000Other expense 6,750 5,000Total expenses 309,950 287,350Cash and cash equivalents $119,000 $83,650Requirements:1. Prepare a horizontal analysis of the comparative income statement of Verifine Designs Ince. Round percentage changes to the nearest one-tenth percent (three decimal places)2. Why did 2011 net income increase by a higher percentage than net sales revenue?E14-15 Vertical analysis of a balance sheet- Eta Graphics has the following data:Eta Graphics Inc.- Balance sheet- December 31,2010Assets Total currents assets $41,870Property,plant and equipment, net 206,870Other assets 34,870Total assets $283,610Liabilities Total current liabilities $47,870Long term debt 107,870Total liabilities 155,740Stockholder?s Equity Total stockholders equity 127,870Total liabilities and stockholders equity $283,610Requirement:1. Perform a vertical analysis of Eta?s balance sheet.P14-23A Common size statements, analysis of profitability and financial position and comparison with the industryThe Russell Department s Stores, Inc. chief executive officer has asked you to compare the company?s profit performance and financial position with the average 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.Russell Department Stores Inc. Income Statement compared with Industry Average ?Year ended December 31, 2010Russell Industry AverageNet Sales $777,000 100.0%Cost of goods sold 523,698 65.8Gross Profit 253,302 34.2Operating expenses 162,393 19.7Operating income 90,909 14.5Other expenses 7,770 0.4Net Income $83,139 14.1%Russell Department Stores Inc. Balance Sheet compared with Industry Average ?December 31, 2010Russell Industry AverageCurrent Assets $3330,750 70.9%Fixed Assets, net 123,480 23.6Intangible assets, net 9,800 0.8Other assets 25,970 4.7Total assets $490,000 100.0%Current liabilities $227,360 48.1%Long term liabilities 111,720 16.6Stockholders equity 150,920 35.3Total Liabilites $490,000 100.0%Requirements:1. Prepare a common-size income statement and balance sheet for Russell. The first column of each statement should present Russell?s common-size statement and the second column, the industry averages.2. For the profitability analysis, compute Russell?s (a) ration of gross profit to net sales, (b0 ration of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Russells profit performance better or worse than the industry average?3. For the analysis of financial position, compute Russells (a) ration of current assets to total assets and (b)ratio of stockholders equity to total assets. Compare these ratios with the industry averages. Is Russells financial position better or worse than the industry averages?
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