- 44 pages
- English
- ePUB (mobile friendly)
- Available on iOS & Android
eBook - ePub
About this book
Our best-selling Accounting 2 guide has now gotten even better, thanks to the latest up-to-date information added to the original text. The new material within this 3-panel (6 page)guide goes further into the various accounting practices that businesses use to keep financially afloat; mathematical equations, charts, and tables are also included in an easy-to-use format.
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Information
FINANCIAL ANALYSIS
- Horizontal analysis
- Evaluation of financial statement data over period of time
- Increases or decreases of financial items are determined
- Changes are shown in dollars and by percentage
- Find the difference between the most current period balance and the previous period balance for each item on the balance sheet
- Calculate the percentage change as follows: Dollar change ÷ balance from previous period × 100
- Example of a horizontal analysis of a balance sheet:
| Balance Sheet | ||||
| Change | ||||
| 2010 | 2009 | Amount | Percent | |
| Assets | ||||
| Current assets | $1,000,000 | $970,000 | $30,000 | 3.1% |
| Plant assets (net) | 825,000 | 675,000 | 150,000 | 22.2% |
| Intangible assets | 16,000 | 18,500 | (2,500) | -13.5% |
| Totals assets | $1,841,000 | $1,663,500 | $177,500 | 11.8% |
| Liabilities | ||||
| Current liabilities | $350,000 | $305,100 | $44,900 | 14.7% |
| Long-term liabilities | 547,000 | 567,000 | ($20,000) | -3.5% |
| Total liabilities | $897,000 | $872,100 | $24,900 | 11% |
| Stockholders’ Equity | ||||
| Common stock | 290,000 | 280,000 | 10,000 | 3.6% |
| Retained earnings | 654,000 | 511,400 | 142,600 | 27.9% |
| Total stockholders’ equity | 944,000 | 791,400 | 152,600 | 31.5% |
| Total liabilities & stockholders’ equity | $1,841,000 | $1,663,500 | $177,500 | 11% |
-
- Example of a horizontal analysis of an income statement:
| Income Statement | ||||
| Change | ||||
| 2010 | 2009 | Amount | Percent | |
| Sales | $2,200,000 | $1,970,000 | $230,000 | 11.7% |
| Sales returns & allowances | 100,000 | 125,000 | (25,000) | -20.0% |
| Net sales | $2,100,000 | $1,845,000 | 255,000 | 13.8% |
| Cost of good sold | 1,381,000 | 1,150,000 | 231,000 | 20.1% |
| Gross profit | $719,000 | $695,000 | 24,000 | 3.5% |
| Selling expenses | 254,000 | 212,500 | 41,500 | 19.5% |
| Administrative expenses | 106,000 | 109,000 | (3,000) | -2.8% |
| Total operating expenses | 360,000 | 321,500 | 38,500 | 12.0% |
| Income from operations | 359,000 | 373,500 | (14,500) | -3.9% |
| Other revenues & gains Interest & dividends | 10,000 | 11,500 | (1,500) | -13.0% |
| Other expenses & losses Interest expense | 35,000 | 41,200 | (6,200) | -15.0% |
| Income before income taxes | 314,000 | 320,800 | (6,800) | -2.1% |
| Income tax expense | 142,500 | 168,000 | (25,500) | -15.2% |
| Net income | $171,500 | $152,800 | $18,700 | 12.2% |
- Vertical analysis
- Evaluation of financial statement data that expresses each item as a percent of a base amount
- Each item on the income statement is divided by net sales
- Each item on the balance sheet is divided by total assets
- Example of a vertical analysis of an income statement:
- Evaluation of financial statement data that expresses each item as a percent of a base amount
| Income Statement | ||||
| 2010 | ||||
| Amount | Percent | 2009 | Percent | |
| Sales | $2,200,000 | 104.8% | $1,970,000 | 106.8% |
| Sales returns & allowances | 100,000 | 4.8% | 125,000 | 6.8% |
| Net sales | $2,100,000 | 100.0% | $1,845,000 | 100.0% |
| Cost of good sold | 1,381,000 | 65.8% | 1,150,000 | 62.3% |
| Gross profit | $719,000 | 34.2% | $695,000 | 37.7% |
| Selling expenses | 254,000 | 12.1% | 212,500 | 11.5% |
| Administrative expenses | 106,000 | 5.0% | 109,000 | 5.9% |
| Total operating expenses | 360,000 | 17.1% | 321,500 | 17.4% |
| Income from operations | 359,000 | 17.1% | 373,500 | 20.2% |
| Other revenues & gains Interest & dividends | 10,000 | 0.5% | 11,500 | 0.6% |
| Other expenses & losses Interest expense | 35,000 | 1.7% | 41,200 | 2.2% |
| Income before income taxes | 314,000 | 15.0% | 320,800 | 17.4% |
| Income tax expense | 142,500 | 6.8% | 168,000 | 9.1% |
| Net income | $171,500 | 8.2% | $152,800 | 8.3% |
-
- Example of a vertical analysis of a balance sheet:
| Balance Sheet | ||||
| 2010 | 2009 | |||
| Amount | Percent | Amount | Percent | |
| Assets | ||||
| Current assets | $1,000,000 | 54.3% | $970,000 | 58.3% |
| Plant assets (net) | 825,000 | 44.8% | 675,000 | 40.6% |
| Intangible assets | 16,000 | 0.9% | 18,500 | 1.1% |
| Totals assets | $1,841,000 | ...|||
Table of contents
- Accounting Functions
- Management Accounting Basics
- Cost Behavior
- Budgeting
- Management Control Systems
- Decentralized Organizations
- Capital Budgeting
- Cost Allocation
- Financial Analysis