Question

In: Finance

The comparative condensed income statements of Emley Corporation are shown below.

The comparative condensed income statements of Emley Corporation are shown below.

EMLEY CORPORATION Comparative Condensed Income Statements For the Years Ended December 31 2017 2016 Net sales $660,000 483,000 $600,000 Cost of goods sold Gross profit Operating expenses 420,000 177,000 125,000 180,000 120,000 Net income $ 52,000 $ 60,000

 

Instructions

(a) Prepare a horizontal analysis of the income statement data for Emley Corporation using 2016 as a base. (Show the amounts of increase or decrease.)

(b) Prepare a vertical analysis of the income statement data for Emley Corporation in columnar form for both years.

Solutions

Expert Solution

a.

Horizontal Analysis    
Particulars 2016 2017 Increase % increase= change/figures in 2016 *100    
Net Sales 600000 660000 60000 10    
Less: Cost of goods sold 420000 483000 63000 15    
Gross Profit 180000 177000 -3000 -1.67    
Less: Operating Expenses 120000 125000 5000 4.17    
Net Income 60000 52000 -8000 -13.33  


 

b.

Vertical Analysis    
Particulars 2016 % of sales 2017 % of sales Increase in terms of Proportion of sales  
Net Sales 600000 100 660000 100.00 -  
Less: Cost of goods sold 420000 70 483000 73.18 3.18  
Gross Profit 180000 30 177000 26.82 -3.18  
Less: Operating Expenses 120000 20 125000 18.94 -1.06  
Net Income 60000 10 52000 7.88 -2.12  
             
Liquidity ratios    
Particulars 2016 Ratios 2017      
Net Sales 600000   660000      
Less: Cost of goods sold 420000   483000      
Gross Profit 180000 30 177000 26.82    
Less: Operating Expenses 120000   125000      
Net Income 60000 10 52000 29.38  

a.

Horizontal Analysis    
Particulars 2016 2017 Increase % increase= change/figures in 2016 *100    
Net Sales 600000 660000 60000 10    
Less: Cost of goods sold 420000 483000 63000 15  

Junaid answered 2 years ago
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