Question

A condensed balance sheet for Simultech Corporation and a partially completed vertical analysis are presented below.

Required:

1. Complete the vertical analysis by computing each missing line item as a percentage of total assets.
2-a. What percentage of Simultech’s total assets relate to inventory?
2-b. What percentage of Simultech’s total assets relate to property and equipment?
2-c. Which of these two asset groups is more significant to Simultech’s business?
3. What percentage of Simultech’s assets is financed by total stockholders' equity? By total liabilities?

Complete the vertical analysis by computing each missing line item as a percentage of total assets. (Round your answers to the nearest whole percent.)

SIMULTECH CORPORATION Balance Sheet (summarized) January 31 (in millions of U.S. dollars) Cash $553 31 % Current Liabilities $519 30 % Accounts Receivable 314 18 Long-term Liabilities 605 34 Inventory 226 13 Total Liabilities 1,124 Other Current Assets 169 Common Stock 122 Property and Equipment 31 2 Retained Earnings 512 29 Other Assets 465 26 Total Stockholders’ Equity 634 Total Assets $1,758 100 % Total Liabilities & Stockholders’ Equity $1,758 100 %

Answer 1

1.

Working note:

2-a. 13%

2-b. 2%

2-c. Inventory

3. 36% of total asset is financed by stockholders' equity, and 64% of total asset is financed by liabilities