Chapter 24: Question 4P-d (page 1452)

(Horizontal and Vertical Analysis) Presented below is the comparative balance sheet for Gilmour Company.
GILMOUR COMPANY
COMPARATIVE BALANCE SHEET
AS OF DECEMBER 31, 2018 AND 2017
December 31
2018
2017
Assets
Cash
\( 180,000
\) 275,000
Accounts receivable (net)
220,000
155,000
Short-term investments
270,000
150,000
Inventories
1,060,000
980,000
Prepaid expenses
25,000
25,000
Plant & equipment
2,585,000
1,950,000
Accumulated depreciation
(1,000,000)
(750,000)
\(3,340,000
(2,785,000)
Liabilities and Stockholders’ Equity
Accounts payable
\) 50,000
\( 75,000
Accrued expenses
170,000
200,000
Bonds payable
450,000
190,000
Common stock
2,100,000
1,770,000
Retained earnings
570,000
550,000
\)3,340,000
(2,785,000)
Instructions
(Round to two decimal places.)
Of what value is the additional information provided in part (b)?

Short Answer

Expert verified

This claim contradicts the 19.93 percent increase, making it easier for experts to identify any discrepancy.

Step by step solution

Meaning of Financial Analysis

The process of financial analysis refers to examining financial data to make business choices. This type of research usually requires looking at past records, future probability cash flow, and risk.

Determining the value, which is the additional information provided in part (b)

Part (b) of the statement provides an excellent analysis and breakdown of the overall change in assets and liabilitiesas well as shareholders' equity. This statement contradicts the 19.93% increase, making it easier for analysts to spot any discrepancies.

Increases in accounts receivable, short-term investments, and fixed assets explain an increase in the asset side, while an increase in bonds payable and capital stocks explains an increase in the liability side. This statement simplifies the study of year operations in general.

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(\(000 omitted)
	2018	2017	2016	2015	2014
Sales revenue	\)20,000	\(16,000	\)14,000	\(6,000	\)4,000
Net income	2,400	14,000	800	700	250
Average total assets	22,000	19,000	11,500	4,200	3,000
Current assets	8,000	6,000	3,000	1,200	1,000
Working capital	3,600	3,200	1,200	500	400
Common shares: Number of shares Outstanding (000) Average market price	2,000 \(9	2,000 \)6	2,000 $4	20 -	20 -

(\(000 omitted)
	2018	2017	2016	2015	2014
Sales revenue	\)20,000	\(16,000	\)14,000	\(6,000	\)4,000
Net income	2,400	14,000	800	700	250
Average total assets	22,000	19,000	11,500	4,200	3,000
Current assets	8,000	6,000	3,000	1,200	1,000
Working capital	3,600	3,200	1,200	500	400
Common shares: Number of shares Outstanding (000) Average market price	2,000 \(9	2,000 \)6	2,000 $4	20 -	20 -

Operating Segment	Total Revenue	Operating Profit (Loss)	Identifiable Assets
W	\( 60,000	15,000	\)167,000
X	10,000	3,000	83,000
Y	23,000	(2,000)	21,000
Z	9,000	1,000	19,000
	\(102,000	\)17,000	$290,000

Short Answer

Step by step solution

Meaning of Financial Analysis

Determining the value, which is the additional information provided in part (b)

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GILMOUR COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2018 AND 2017
December 31
	2018	2017
Assets
Cash	\( 180,000	\) 275,000
Accounts receivable (net)	220,000	155,000
Short-term investments	270,000	150,000
Inventories	1,060,000	980,000
Prepaid expenses	25,000	25,000
Plant & equipment	2,585,000	1,950,000
Accumulated depreciation	(1,000,000)	(750,000)
	\(3,340,000	(2,785,000)

Liabilities and Stockholders’ Equity
Accounts payable	\) 50,000	\( 75,000
Accrued expenses	170,000	200,000
Bonds payable	450,000	190,000
Common stock	2,100,000	1,770,000
Retained earnings	570,000	550,000
	\)3,340,000	(2,785,000)