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Chapter 15: Q2SE (page 835)

Verifine Corp. reported the following on its comparative income statement:

(In millions)2019 2018 2017

Revenue \( 9,890 \) 9,690 $ 9,135

Cost of Goods Sold 6,250 6,000 5,890

Prepare a horizontal analysis of revenues and gross profit—both in dollar amounts

and in percentages—for 2019 and 2018.

Short Answer

Expert verified

Answer

For 2019 Revenue Increases by 200& 2.06% and COGS Increases by 250 &4.17%

for 2018 Revenue Increases by 555 & 6.08% and COGS Increases by 110 & 1.87%

Step by step solution

01

Horizontal analysis for 2019


2019

(A)

2018

(B)

Increase/ decrease

(C=A-B)

Percentage Increase/ Decrease

(C/B)


Revenue

9,890

9,690

200

2.06%

Cost of Goods Sold

6,250

6,000

250

4.17%

02

Horizontal analysis for 2018


2018

(A)

2017

(B)

Increase/ decrease

(C=A-B)

Percentage Increase/ Decrease

(C/B)


Revenue

9,690

9,135

555

6.08%

Cost of Goods Sold

6,000

5,890

110

1.87%

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Most popular questions from this chapter

Monroe Corp. reported the following amounts on its balance sheet at December 31, 2018 and 2017:

2018, 2017

Cash and Receivables \( 35,000 \) 40,000

Merchandise Inventory 20,000 15,000

Property, Plant, and Equipment, Net 80,000 60,000

Total Assets \( 135,000 \) 115,000

Prepare a vertical analysis of Monroe Corp. for 2018 and 2017.

Micatin, Inc.’s comparative income statement follows. The 2017 data are given as needed.


MICATIN INC.

Comparative Income Statement

Years Ended December 31, 2019, and 2018

Dollars in thousands

2019

2018

2017

Net Sales Revenue

\( 181,000

\) 160,000

Cost of Goods Sold

93,500

86,500

Selling and Administrative Expenses

45,000

40,500

Interest Expense

8,000

12,000

Income Tax Expense

11,000

10,500

Net Income

\( 23,500

\) 10,500

Additional data:

Total Assets

\( 209,000

\) 187,000

\( 167,000

Common Stockholders’ Equity

96,000

91,500

80,500

Preferred Dividends

2,000

2,000

0

Common Shares Outstanding During the Year

15,000

15,000

10,000

Requirements

  1. Calculate the profit margin ratio for 2019 and 2018.
  2. Calculate the rate of return on total assets for 2019 and 2018.
  3. Calculate the asset turnover ratio for 2019 and 2018.
  4. Calculate the rate of return on common stockholders’ equity for 2019 and 2018.
  5. Calculate the earnings per share for 2019 and 2018.
  6. Calculate the 2019 dividend payout on common stock. Assume dividends per share for common stock are equal to \)1.13 per share.
  7. Did the company’s operating performance improve or deteriorate during 2019?

The following data are adapted from the financial statements of Bridget’s Shops, Inc.:

Total Current Assets $ 1,216,000

Accumulated Depreciation 2,000,000

Total Liabilities 1,540,000

Preferred Stock 0

Debt Ratio 55%

Current Ratio 1.60

Prepare Bridget’s condensed balance sheet as of December 31, 2018.

Briefly describe the ratios that can be used to evaluate a company’s ability to pay long-term debt.

Briefly describe the ratios that can be used to evaluate a company’s profitability.
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