Balance Sheet

Heads 2010 2009 Amount %age

Assets:
Current Assets:
Cash 11,199 9,151 2,048 22.38%
Marketable Securities 138 62 76 122.58%
Accounts Receivable 4,430 3,758 672 17.88%
Inventory 2,650 2,354 296 12.57%
Other Current Assets 3,162 2,226 936 42.05%
Non Current Assets:
Long Term Investments 9,706 8,731 975 11.17%
Property, Plant and Machinery 14,727 9,561 5,166 54.03%
Intangible Assets 26,909 12,828 14,081 109.77%
Total Assets 72,921 48,671 24,250 49.82%
Liabilities an Equity:
Current Liabilities
Accounts payable and Accrued Liabilities 8,859 6,657 2,202 33.08%
Loans and Notes Payable 8,100 6,749 1,351 20.02%
Other Liabilities 1,549 315 1,234 391.75%
Equity:
Common Stock 10,937 9,417 1,520 16.14%
Retained Earnings 49,592 42,084 7,508 17.84%
Accumulated Income (Loss) 1,450 757 693 91.55%
Treasury Stock 27,762 25,398 2,364 9.31%
Total liabilities + Equity 72,921 48,671 24,250 49.82%

Income Statement
Heads 2010 2009 Amount %age
Net Sales 35,119 30,990 4,129 13.32
Cost of Goods Sold 12,693 11,088 1,605 14.48
Gross Margin/Profit 22,426 19,902 2,524 12.68
Selling & Administration Expenses 13,158 11,358 1,800 15.85
Other Operating Expenses 819 313 506 161.66
Operating Income 8,449 8,231 218 2.65
Interest Expense 733 355 378 106.48
Other Income 6,477 988 5,489 555.57
Income before Taxes 14,193 8,864 5,329 60.12
Income Tax Expense 2,384 2,040 344 16.86
Net Income after Tax 11,809 6,824 4,985 73.05
 Remarks

Cash and Cash Equivalent increased 22.4%, Marketable

Securities increased 122.6%, Inventory increased 12.6% and
other Current Assets increased 42%

Long Term Liabilities increased 11.20%, Plant, Machinery

and Property increased 54.00%, Intangible Assets increased
109.80%

Increase in Total Assets is 49.80%

Accounts Payable and Accrued Liabilities increased 33.10%,

Loans and Notes Payable increase 20.00%, Other liabilities
increased 391.70%

Common Stock and Retained Earnings increased 16.10% and

17.80% respectively, Accumulated income increase 91.50%
and Treasury Stock increased 9.30%.

Total Liabilities & Equity increase49.80%

Remarks

Net sales increase 13.32%, CGS increase 14.48%. The result is

12.7% increase in Gross Margin

Selling & Administration Expenses increase 15.85% and

operating expenses increase 161.66%
 Selling & Administration Expenses increase 15.85% and
operating expenses increase 161.66%

Operating Income increase 2.65%, Interest Expense

increased 106.48% and 555.57% raise in other income seen

IBT increase 60.12%, which results in 16.86% increase in Tax

Expense. Net Income increase 73.05%
Do the Vertical Analysis and intrepret the results?
Balance Sheet
Heads 2010 2009 %age of Total
Assets 2009

Assets:
Current Assets:
Cash 11,199 9,151 15.36
Marketable Securities 138 62 0.19
Accounts Receivable 4,430 3,758 6.08
Inventory 2,650 2,354 3.63
Other Current Assets 3,162 2,226 4.34
Non Current Assets:
Long Term Investments 9,706 8,731 13.31
Property, Plant and Machinery 14,727 9,561 20.20
Intangible Assets 26,909 12,828 36.90
Total Assets 72,921 48,671 100.00
Liabilities and Equity:
Current Liabilities
Accounts payable and Accrued Liabilities 8,859 6,657 12.15
Loans and Notes Payable 8,100 6,749 11.11
Other Liabilities 1,549 315 2.12
Equity:
Common Stock 10,937 9,417 15.00
Retained Earnings 49,592 42,084 68.01
Accumulated Income (Loss) 1,450 757 1.99
Treasury Stock 27,762 25,398 38.07
Total liabilities + Equity 72,921 48,671

Income Statement
Heads 2010 2009 %age of Net
Sales 2009

Net Sales 35,119 30,990 100.00

Cost of Goods Sold 12,693 11,088 36.14
Gross Margin/Profit 22,426 19,902 63.86
Selling & Administration Expenses 13,158 11,358 37.47
Other Operating Expenses 819 313 2.33
Operating Income 8,449 8,231 24.06
Interest Expense 733 355 2.09
Other Income 6,477 988 18.44
Income before Taxes 14,193 8,864 40.41
Income Tax Expense 2,384 2,040 6.79
Net Income after Tax 11,809 6,824 33.63

Common Size/Vertical Analysis

Vertical analysis is a method of financial statement analysis in which each entry for each of the three major c
balance sheet is represented as a proportion of the total account.Common-size analysis (also called vertical
an easily comparable, or common-size, amount measured as a percent. This is done by stating income statem
as a percent of total assets (or total liabilities and shareholders’ equity). For example a company had net in
common-size percent is simply net income divided by net sales, or 33.6 perc

There are two reasons to use common-size analysis: (1) to evaluate information from one period to the next
to its competitors. Common-size analysis answers such questions as “how do our current assets as a percen
our net income as a percent of net sales compare with that of our competitors?” The main advantages of ver
sizes can easily be compared. It also makes it easy to see relative annual cha
In income statements, all items are usually expressed as a perce
ance Sheet
%age of Total Remarks
Assets 2010

18.80%
Cash is 15.36% of Total Assets for Year 2009 and it is 18.80%
of Total Assets of 2010

me Statement
%age of Net Remarks
Sales 2010
e/Vertical Analysis

y for each of the three major categories of accounts (assets, liabilities and equities) in a
e analysis (also called vertical analysis) converts each line of financial statement data to
done by stating income statement items as a percent of net sales and balance sheet items
example a company had net income of $11,809, and net sales of $35,119 for 2010. The
ded by net sales, or 33.6 percent (= $11,809 ÷ $35,119).

on from one period to the next within a company and (2) to evaluate a company relative
our current assets as a percent of total assets compare with last year?” and “how does
?” The main advantages of vertical analysis is that the balance sheets of businesses of all
easy to see relative annual changes within one business.
e usually expressed as a percentage of sales
 Balance Sheet
Heads 2010 2009 2009 Base
Year =100%

Assets:
Current Assets:
Cash 11,199 9,151 100
Marketable Securities 138 62 100
Accounts Receivable 4,430 3,758 100
Inventory 2,650 2,354 100
Other Current Assets 3,162 2,226 100
Non Current Assets:
Long Term Investments 9,706 8,731 100
Property, Plant and Machinery 14,727 9,561 100
Intangible Assets 26,909 12,828 100
Total Assets 72,921 48,671 100
Liabilities an Equity:
Current Liabilities
Accounts payable and Accrued Liabilities 8,859 6,657 100
Loans and Notes Payable 8,100 6,749 100
Other Liabilities 1,549 315 100
Equity:
Common Stock 10,937 9,417 100
Retained Earnings 49,592 42,084 100
Accumulated Income (Loss) 1,450 757 100
Treasury Stock 27,762 25,398 100
Total liabilities + Equity 72,921 48,671 100

Income Statemen
Heads 2010 2009
Net Sales 35,119 30,990 100
Cost of Goods Sold 12,693 11,088 100
Gross Margin/Profit 22,426 19,902 100
Selling & Administration Expenses 13,158 11,358 100
Other Operating Expenses 819 313 100
Operating Income 8,449 8,231 100
Interest Expense 733 355 100
Other Income 6,477 988 100
Income before Taxes 14,193 8,864 100
Income Tax Expense 2,384 2,040 100
Net Income after Tax 11,809 6,824 100
 Balance Sheet
Amount of %age %age
Change Increase/Dec
rease

2,048 22.38 122.38

76 122.58 222.58
672 17.88 117.88
296 12.57 112.57
936 42.05 142.05
0
975 11.17 111.17
5,166 54.03 154.03
14,081 109.77 209.77
24,250 49.82 149.82
0
0
2,202 33.08 133.08
1,351 20.02 120.02
1,234 391.75 491.75
0
1,520 16.14 116.14
7,508 17.84 117.84
693 91.55 191.55
2,364 9.31 109.31
24,250 49.82 149.82

Income Statement
Amount %age
4,129 13.32 113.32
1,605 14.48 114.48
2,524 12.68 112.68
1,800 15.85 115.85
506 161.66 261.66
218 2.65 102.65
378 106.48 206.48
5,489 555.57 655.57
5,329 60.12 160.12
344 16.86 116.86
4,985 73.05 173.05
Remarks

Remarks
 Trend Analysis

Trend analysis evaluates an organization’s financial information over a period of time. Periods may be
measured in months, quarters, or years, depending on the circumstances. The goal is to calculate and
analyze the amount change and percent change from one period to the next.

For example, in fiscal years 2010 and 2009 a company had the operating income shown as follows.
2009 2010 Change in Amount %age
Operating Income 8231 8449 218 2.65
Amount of Change = Current Year Amount - Base Year Amount
% Amount of Change = Amount of Change /
Base Year Amount *100 OR Current Year
Amount - Base Year Amount/Base Year Amount *100

2006 2007 2008 2009

Net Sales 24088 28857 31944 30990
Trend %age 100 119.80 132.61 128.65
Operating Income 6308 7252 8446 8231
Trend %age 100 114.97 133.89 130.49
 Balance Sheet
Heads 2010 2009
Assets:
Current Assets:
Cash 30,000 20,000
Accounts Receivable 20,000 17,000
Inventory 12,000 10,000
Prepaid Expenses 3,000 2,000
Total Current Assets 65,000 49,000
Non Current Assets:
Land 165,000 123,000
Building & Equipment 116,390 128,000
Total Non Current Assets 281,390 251,000
Total Assets 346,390 300,000
Liabilities and Equity:
Current Liabilities
Accounts Payable 39,000 40,000
Loans and Notes Payable (Short Term) 3,000 2,000
Total Current Liabilities 42,000 42,000
Long Term Liabilities
Notes Payable 70,000 78,000
Total liabilities 112,000 120,000
Equity:
Common Stock, Par Value 1$ 27,400 17,000
Additional Paid in capital 158,100 113,000
Total Paid in Capital 185,500 130,000
Retained Earnings 48,890 50,000
Total Stockholder's Equity 234,390 180,000
Total Liabilities and Equity: 346,390 300,000
Income Statement
Heads 2010 2009
Net Sales 494,000 450,000
Less Cost of Goods Sold 140,000 127,000
Gross Profit/Margin 354,000 323,000
Less Operating Expenses 270,000 249,000
Net Operating Income 84,000 74,000
Less Interest Expenses 7,300 8,000
Net Income before Taxes 76,700 66,000
Less Taxes (30%) 23,010 19,800
Net Income 53,690 46,200
Common Shares 44,400
Other Details
Accounts Heads 2010
Cash 30,000
Accounts Receivable
Start of the Year 17,000
End of the Year 20,000
Inventory
Start of the Year 10,000
End of the Year 12,000
Total Current Assets 65,000
Total Current Liabilities 42,000
Sales on Account 494,000
Cost of Goods Sold 14,000

Current Ratio = Current Assets/Current Liabilities = 65,000/42,000 = 1.55 : 1

Acid Test Ratio = Quick Ratio = Quick Assets/Current Liabilities = Cash + Securities/Current
Liabilities = 30,000 + 20,000 /42,000 = 1.19 : 1

Note: Quick Assets are Cash, Marketable Securities, Accounts and Notes Receivable
Equity Ratio = Total Equity/Total Assets =234,390 /346,000 = 67.74%
Note: 67.74% proportion
of total assets is provided by
stockholders
Accounts Receivable Turnover Ratio = Sales on Account / Avg. Accounts Receivable = Net Credit
Sales / (Opening + Ending ) / 2 = 494,000/ (17,000 +20,000 0/2 = 494,000 / 18,500 = 26.70
time
 No. of Days Sales Receivable = 365 days/ Accounts Receivable Turnover Ratio = 365/26.70 =
13.67 days

Inventory Turnover = CGS/Avg. Inventory = 140,000/ (10,000 +12,000)/2 = 140,000/11,000 =

12.72 times

Net Income to Net Sales Ratio = Net Incmoe / Net Sales = 53,690 /494,000 = 10.87%
Note: Measures the proportion of the sales dollar which is retained as profit.

Return on Equity = Net Income / Avg. Equity = 53,690/ (180,000 + 234,390)/2 = 53,690 /
207,195 = 25.91%

Earning per Share = Net Income / Common Shares Outstanding = 53,690/44,400 = $1.21