Balance Sheet

Year ending Year ending

12/31/2016 12/31/2017
Assets ($ in thousands of dollars)
Current Assets
Cash $ 2,081 $ 2,540
Marketable Securities 1,625 1,800
Accounts Receivable 16,850 18,320
Inventories 26,470 27,530
Total Current Assets 47,026 50,190

Long-Term Assets
Property & Equipment at cost 39,500 43,100
Less Accumulated Depreciation 9,500 11,400
Net Property & Equipment 30,000 31,700
Total Long-Term Assets 30,000 31,700

TOTAL ASSETS $ 77,026 $ 81,890

Liabilities
Current Liabilities
Accounts Payable $ 8,340 $ 9,721
Notes Payable @ 10% 5,635 8,500
Taxes Payable 3,150 3,200
Other Current Liabilities 1,750 2,102
Current Portion of Longterm Debt 2,000 2,000
Total Current Liabilities 20,875 25,523

Long-Term Liabilities
Mortgage Bonds @ 9.58% 24,000 22,000
Total Long-Term Liabilities 24,000 22,000

TOTAL LIABILITIES $ 44,875 $ 47,523

Equity

Common Stock $ 13,000 $ 13,000

Paid in Capital in excess of par value 10,000 10,000
Retained Earnings 9,151 11,367

TOTAL EQUITY $ 32,151 $ 34,367

 Income Statement
Year ending Year ending
12/31/2016 12/31/2017
Revenues ($ in thousands of dollars)

Gross Sales Revenues $ 110,900 $ 116,900

Allowance for Sales Returned 3,140 4,140
Net Sales Revenues 107,760 112,760

TOTAL SALES 107,760 112,760

Expenses
Cost of Goods Sold 80,820 85,300

Gross Profits 26,940 27,460

Operating Expenses:
Selling & Marketing 6,250 6,540
General Administrative 8,983 9,400
Total Operating Expenses 15,233 15,940

Operating Income 11,707 11,520

Interest Expenses:
Interest on Loans 900 850
Interest on Mortgage Bonds 2,800 2,310
Total Interest Expenses 3,700 3,160

Earnings Before Taxes 8,007 8,360

Federal & State Taxes @ 40% 3,203 3,344

NET INCOME / PAT 4,804 5,016

Horizontal Analysis or Percentage change where base year = 2016

22%
11%
9%
4%
7%

9%
20%
6%
6%

6%

17%
51%
2%
20%
0%
22%

-8%
-8%

6%

0%
0%
24%

7%
usands of dollars)

5%
32%
5%

5%

6%

2%

5%
5%
5%

-2%

-6%
-18%
-15%

4%

4%

4%
 Introduction to Financial Analysis
Common Size Financial Statements
Vertical analysis of financial statements is most often performed by expressing the Balance Sheet and
Income Statement as common size statements. We can easily understand the relationships between
accounts when we express financials as a percentage of total balances.

Balance Sheet

Year ending Year ending

12/31/2016 12/31/2017
Assets (% of Total Assets)

Cash 2.70% 3.10%

Marketable Securities 2.11% 2.20%
Accounts Receivable 21.88% 22.37%
Inventories 34.37% 33.62%
Total Current Assets 61.05% 61.29%

Net Property & Equipment 38.95% 38.71%

TOTAL ASSETS 100.00% 100.00%

Liabilities

Current Liabilities 27.10% 31.17%

Long-Term Liabilities 31.16% 26.87%

TOTAL LIABILITIES 58.26% 58.03%

Equity

TOTAL EQUITY 41.74% 41.97%

TOTAL LIABILITIES & EQUITY 100.00% 100.00%

Key Points per Review of the Common Size Balance Sheet:

1 The company is fairly liquid since current assets are 61% of total assets.
2 About 55% of all assets are tied up in either Accounts Receivable or Inventories. Therefore, it is
very important to effectively manage these two assets on the Balance Sheet.
3 The company does not appear to be too overly leveraged in debt with a debt leverage below 60%

Income Statement
 Year ending
12/31/2017
(% of Total Net Sales)

NET SALES 100.00%

Cost of Goods Sold 75.65%

Gross Margin 24.35%

Operating Expense 14.14%

Operating Margin 10.22%

Interest Expense 2.80%

Earnings Before Taxes 7.41%

Tax Expense 2.97%

NET INCOME 4.45%

Key Points per Review of the Common Size Income Statement:

1 Cost of products sold represents 75% of all costs the company incurs
2 Operating costs appear to be modest at 14%
3 Return on Sales is rather low at 4.45%
ge below 60%