...Ratio, Vertical, and Horizontal Analysis CheckPoint Stacy J. McKinney XACC/280 August 10, 2012 Benjamin Strickland Ratio, Vertical, and Horizontal Analysis CheckPoint The three tools used in Financial Statement analysis include: Horizontal analysis, Vertical analysis, and Ratio analysis. While both Horizontal and Vertical analysis can be used on any of the four types of financial statements, ratio analysis compares various aspects within the different statements. Horizontal analysis, or as it is sometimes referred to, trend analysis, is used to analyze financial data over a period of time.This analysis provides a picture of increases or decreases. To do this percentages are calculated by dividing current amounts by base year amounts. Next, vertical, or common-size analysis takes each item in financial statements expressed as a percentage of a base amount. Balance Sheets use Total Assets; Net Sales are used in Income Statements. This type of analysis is helpful in showing changes in assets, liabilities, equity, revenue, and expenses over the course of two or more years. It should be noted that these type of analysis can be used both to analyze internal data and compare competing businesses. Ratio analysis evaluates relationships between various financial statement items. These relationships focus on three aspects of business: liquidity, profitability, and solvency. Liquidity relates to short-term debts, profitability to operation efficiency, and solvency to long-term...
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...Week 7 Checkpoint: Ratio, Vertical, and Horizontal Analyses XXXXXXXXXX XACC/280 June 28, 2014 Zenos Gavales A financial statement analysis is the process of review financial statements that can include balance sheets and profit or loss statements. The three tools of financial statement analysis are ratio analysis, horizontal analysis and vertical analysis. With ratio analysis we can analyze data and determine the overall financial strength of a company. Horizontal analysis is a procedure in which an analyst compares ratios or line items in business financial statements over a period of time. Vertical analysis most common use is with financial statements for a single time period. Vertical analysis compares between two or more companies in the same industry. PepsiCo, Inc. The current ratio for any company is calculated with the use of the following mathematical equation. Current Ratio = Current Assets Current Liabilities 2005 2004 $10454 =1.11:1 $8639 =1.28:1 $ 9406 $6752 Vertical Analysis = Item on BIS = Percentage Total Assets Or Item on BIS Total Liabilities w/shareholders equity =Percentage Two measures of vertical analysis: Current Assets = 10454 = 33% Total Assets 31727 Short – term Obligations = 2889 = 9% Total Liabilities w/shareholders equity...
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...|[pic] |Syllabus | | |Axia College/School of Business | | |XACC/280 Version 2 | | |Financial Accounting Concepts and Principles | Copyright © 2010, 2009 by University of Phoenix. All rights reserved. Course Description This course covers the fundamentals of financial accounting as well as the identification, measurement, and reporting of the financial effects of economic events on the enterprise. Financial information is examined from the perspective of effective management decision making with special emphasis on the planning and controlling responsibilities of practicing managers. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: • University policies: You must be logged into the student website to view this document. • Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning...
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...Week 7 day 6 checkpoint The three financial statement analysis tools are the following, horizontal, vertical and ratio analays. The horizontal analysis is when you compare two or more years for a single company, it also compares dollar amounts, inventory and cash. Vertical analysis- This calculates get the percentage of the total calculated on a single financial statement Ratio analysis- This is the relationship between the vertical and horizontal analysis, this is used to calculate the financial trends for a number or years Calculations- Liabilities and Assets for PepsiCo Inc. based on their consolidated Balance Sheet 2005 Current Ratio= 10,454 (Current Assets) | = 1.11% | 9,406 (Current Liabilities) | 2004 Current Ratio= 8,639 (Current Assets) | = 1.28% | 6,752 (Current Liabilities) | | Vertical Analysis- 2005 %= 1,716 (Cash, and Cash Equivalent) | = 0.054 or 5.4% | 3,1727 (Total Assets) | | Vertical Analysis- 2004 %= 1,280 (Cash and Cash Equivalent) | = 0.046 or 4.6% | 27,987 (Total Assets) | | Horizontal Analysis- 2005 (10454 (total current assets 2005) / (8639 (total current assets 2004) = 1.2101 | Or 21% | Horizontal Analysis- 2004 (9404 (total current liabilities 2005) / (6752 (total current liabilities 2004) = 1.393 | Or 39% | These analysis show: that the PepsiCo has had an increase in assets by...
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...Checkpoint: Ratio, Vertical, and Horizontal Analysis The current ratio shows the percentage of liabilities there is compared to the assets. It is the total current assets divided by the total current liabilities. The vertical analysis is the current assets divided by the total assets for that year. The result is shown in percentage. The horizontal analysis is the change in assets. The current assets of one year divided by another year will show the increase or decrease in assets for those years. The same thing applies to the liabilities. Each year’s current liabilities will be identified. The most recent year will be divided by the previous year. The result will show the increase or decrease in liabilities by percentage. PepsiCo, Incorporated Current ratio 2005: Current ratio 2004: Current assets = 10454 = 1.11% Current assets = 8639 = 1.28% Current liabilities 9406 Current liabilities 6752 Vertical Analysis 2005 Vertical Analysis 2004 Current assets = 10454 = 33% Current assets = 8639 = 31% Total assets 31727 Total assets 27987 Horizontal Analysis Total assets 2005 = 31727-27987= 3740 = 0.1336 = 13.4% Total assets 2004 27987 Total liabilities 2005 = 17476-14464 = 3012 = 0.2082 = 20.8% Total liabilities 2004 14464 There...
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...|[pic] |Course Syllabus | | |XACC/291 | | |Principles of Accounting II | | |1/13/2014-3/16/2014 | Copyright © 2011 by University of Phoenix. All rights reserved. Course Description This course introduces accounting concepts in a business environment. Students learn to create and apply accounting documents in making better business decisions. Other topics include plant assets, liabilities, accounting for corporations, investments, statements of cash flows, financial statement analysis, time value of money, payroll accounting, and other significant liabilities. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: University policies: You must be logged into the student website to view this document. Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning...
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...v XACC/280Week-Seven CheckPoint Ratio, Vertical, and Horizontal Analyses Financial statement analysis is the process of examining relationships among financialstatement elements and making comparisons with relevant information. There are a variety of toolsused to evaluate the significance of financial statement data. Three of the commonly used tools are the ratio analysis, horizontal analysis, andvertical analysis. Ratio analysis is a method of analyzing data to determine the overall financial strength of a business. These ratios are most useful when compared to other ratios such as the comparable ratios of similar businesses or the historical trend of a single business over several business cycles.Horizontal analysis is a type of fundamental analysis in which certain financial data is used toasses a company's performance over a period of time. Horizontal analysis can be assessed on a singlecompany over a period of time, comparing the same items or ratios, or it can be performed on multiplecompanies in the same industry to assess a company's performance relative to competitors.Vertical analysis is a method of analyzing financial statements in which each item in thestatement is represented as a percentage of a single larger item. Vertical analysis makes comparisons between two or more companies in the same industry easier. It also allows a company to weigh currentreports...
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...|[pic] |Course Syllabus | | |School of Business | | |XACC/291 Version 1 | | |Principles of Accounting II | Copyright © 2011 by University of Phoenix. All rights reserved. Course Description This course introduces accounting concepts in a business environment. Students learn to create and apply accounting documents in making better business decisions. Other topics include plant assets, liabilities, accounting for corporations, investments, statements of cash flows, financial statement analysis, time value of money, payroll accounting, and other significant liabilities. Policies Faculty and students/learners will be held responsible for understanding and adhering to all policies contained within the following two documents: University policies: You must be logged into the student website to view this document. Instructor policies: This document is posted in the Course Materials forum. University policies are subject to change. Be sure to read the policies at the beginning...
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...Wilson Roldan Week 7 Checkpoint PepsiCo. Appendix A: Current ratio for 2005: $10,454 (Current Assets) $ 9,406 (Current Liabilities) $10,454 divided by $9,406 is equaled to 1.11% Current ratio for 2004: $8,639 (Current Assets) $6,752 (Current Liabilities) $8,639 divided by $6,752 is equaled to 1.28% Vertical analysis for 2005: Current Assets divided by Total Assets 10,454 / 31,727 = .3294 or 32.9% Vertical analysis for 2004: Current Assets divided by Total Assets 8,639 / 27,987 = .3086 or 30.9% Horizontal analysis: Current Assets 2005 divided by Current Assets 2004 10,454 / 8,639 = 1.21 or 21% Current Liabilities 2005 divided by Current Liabilities 2004 9,406 / 6,752 = 1.39 or 39% These analysis shows that the PepsiCo has had an increase in assets by 21% from one year to the next, with an increase in liabilities of 39%. This is a result of the company obtaining more liabilities. Appendix B: Current Ratio for 2005: $10,250 (Current Assets) $ 9,836 (Current Liabilities) $10,250 divided by $9,836 is equaled to 1.04% Current Ratio for 2004: $12,281 (Current Assets) $11,133 (Current Liabilities) $12,281 divided by $11,133 is equaled to 1.10% Vertical analysis for 2005: Current Assets divided by Total Assets 10,250 / 29,427 = .348 or 34.8% Vertical analysis for 2004: Current Assets divided by Total Assets 12,281 / 31,441 = .3906 or 39.1% Horizontal analysis: Current Assets 2005 divided by Current Assets 2004 10,250 / 12,281 = .8346...
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...WGU FINANCIAL ANALYSIS JET- TASK 1 December, 2013 Determining the current performance and future potential performance of a company is a complicated and lengthy process that requires the analyses of several aspects of their operations as well as their financial indicators. Standard industry financial indicators are used to measure against known success rates and will indicate the stability of a company in its current operations. Using the history and trend of these same indicators will predict the future financial performance of the company. These key indicators are not very different than a large scale of the indicators we use in our own personal life to budget our families and ensure our future ability to pay our bills while growing our personal wealth through asset ownership. The basis of the successful budget or operation is a guaranteed and continued positive income, minimization of debts, and gaining both liquid and non-liquid assets to our ownership. To measure and predict these indicators, we will need to analyze the industry standard tools that are accepted as financially credible information regarding the company. These tools are in the form of income statements, balance sheets, cash flow statements, asset definitions, and overall profit statements that capture the net result of the operations and trend these results into a history of performance and potential to perform in the future. A. To evaluate Competition Bikes, we will look at four different ways...
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...JET2 TASK 1 Introduction Competition Bikes, Inc. is a large company who during recent years has been affected by the changing population and recession. With this have come changes to the financial status of the company. Analyzing the company’s strengths and weaknesses in multiple aspects with regards to financial stats including working capital, internal controls, risks, and compliance with regulations will allow the company to increase revenue and make a plan for future growth and development. A1a: Horizontal Analysis A horizontal analysis allows comparison of multiple years in a linear fashion, compared with the totals to give a percentage of change (Investopedia, 2013a). The company has many strengths and weaknesses within their financial statements based on the horizontal analysis. The net sales amount for the company is the money the company makes after any deductions, returns, discounts, etc. A weakness for the company is the fact that sales have been down in the last year, showing a net sales change of -15% for years 7 and 8. This is mainly due to the current state of the economy, which has caused a decrease in sponsor sales and funding. A strength for the company is the great potential for an increase in net sales in the coming years. The numbers show that from years 6 to 7 there was a 33.3% increase in sales due to the high demand for the CarbonLite bike products that the professional riders want. Since the company has a highly coveted product and the economy has...
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...With the sales growth and expected continual growth in Europe, Custom Snowboards, Inc. is considering an expansion into Europe. The company has two options for expansions; to build a new manufacturing facility or to merge/acquire the operations of an already established European manufacturer called European Snow Fun. In order for an acquisition to work, the company would need a loan from the bank for one million dollars. A1. Looking at the financial aspect of the company, there are a few key points that could affect a bank officer’s decision. The bank officer would need to figure in on how the company would be able to pay the debt back. The vertical analysis shown in the financial statement shows how the base amount in relation to the particular items. There are a few main points to gather from the vertical analysis. The first one we will take a look at is the net sales of every year. In year 2012, the net sale was $6,601,000 with a gross profit of $2,009,000. In year 13, we saw an increase to $6,633,200 in net sales with a gross profit of $2,018,800. However, we see some concern when taking a look at year 14. The sales declined by $225,400 compared to year 13, while gross profits took only a slight decline of $68,600. It seems that this was due to the fact that they were cutting back on operating expenses compared to the previous years. In year 12, the total selling expense was $779,000, in year 13 it was $782,800, and in year 14 they dropped it down to $756,200. In...
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...Transactions and Strategies Economics for Management This page intentionally left blank Transactions and Strategies Economics for Management ROBERT J. MICHAELS Mihaylo College of Business and Economics California State University, Fullerton Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States Transactions and Strategies: Economics for Management Robert J. Michaels Vice President of Editorial, Business: Jack W. Calhoun Publisher: Joe Sabatino Sr. Acquisitions Editor: Steve Scoble Supervising Developmental Editor: Jennifer Thomas Editorial Assistant: Lena Mortis Sr. Marketing Manager: John Carey Marketing Coordinator: Suellen Ruttkay Marketing Specialist: Betty Jung Content Project Manager: Cliff Kallemeyn Media Editor: Deepak Kumar Sr. Art Director: Michelle Kunkler Frontlist Buyer, Manufacturing: Sandee Milewski Internal Designer: Juli Cook/ Plan-It-Publishing, Inc. Cover Designer: Rose Alcorn Cover Image: © Justin Guariglia/Corbis © 2011 South-Western, Cengage Learning ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means— graphic, electronic, or mechanical, including photocopying, recording, taping, Web distribution, information storage and retrieval systems, or in any other manner—except as may be permitted by the license terms herein. For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support...
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...CHAPTER 4 Engagement Planning LEARNING OBJECTIVES | Review Checkpoints | Exercises, Problems and Simulations | 1. List and describe the activities auditors undertake before beginning an engagement. | 1, 2, 3, 4 | 53, 54, 55, 62, 66 | 2. Identify the procedures and sources of information auditors can use to obtain knowledge of a client’s business and industry. | 5, 6, 7, 8, 9 | 52, 56, 59, 65 | 3. Perform analytical procedures to identify potential problems. | 10, 11, 12, 13, 14, 15 | 47, 48, 49, 51, 58, 63, 64 | 4. List and discuss matters of planning auditors should consider for clients who use computers and describe how a computer can be used as an audit tool. | 16, 17, 18, 19, 20, 21, 22 | 57, 60 | 5. Review audit documentation for proper form and content. | 23, 24, 25 | 50, 61 | SOLUTIONS FOR REVIEW CHECKPOINTS 4.1 A CPA can use the following sources of information to help decide whether to accept a new audit client. Financial information prepared by the prospective client: * Annual reports to shareholders * Interim financial statements * Securities registration statements * Annual report on SEC Form 10K * Reports to regulatory agencies Inquiries directed to the prospect's business associates: * Banker * Legal counsel * Underwriter * Other persons, e...
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...CHAPTER 19 Fraud Awareness Auditing LEARNING OBJECTIVES | | | | | | |Review Checkpoints |Exercises Problems |Cases | | | | | | |1. Define and explain the differences among several kinds of fraud, |1, 2, 3 |45, 46 | | |errors, irregularities, and illegal acts that might occur in an | | | | |organization. | | | | | | | | | |2. Explain the various auditing standards regarding external, internal, |4, 5, 6, 7, 8 | | | |and governmental auditors' responsibilities with respect to detecting | | | | |and reporting errors, irregularities, and illegal...
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