...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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...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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...most recently released annual reports of both entities. They should be the same year. Using this financial information, please complete the following: * Horizontal analysis of the 2 most recent years for the balance sheets and the income statements for each company * Comparison of the results of the horizontal analyses of the two companies * Vertical analysis of the balance sheets and income statements producing common-size percents for the current year * Comparison of the results of the vertical analyses of the two companies * Ratio analysis for the current year of your 2 companies using 4 liquidity and efficiency ratios, 2 solvency ratios, 4 profitability ratios, and the price-earnings ratio Prepare a report for your CFO presenting these analyses (see exhibits 17.8 and 17.9) and a comparative chart of your ratios. Your report should include a discussion of both companies and their strengths and weaknesses. You must present your recommendation of which stock to purchase which includes a well reasoned argument for that purchase. Use the results of your horizontal and vertical analyses as well as your ratio results to support your decision. This assignment is due on April 23rd at 11:59 p.m. and should be submitted to me at mmunro@edison.edu. Assignment of points: Horizontal Analyses 10 points Comparison 10...
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...restating and summarizing data by establishing ratios and trends is known as a financial analysis. The financial statement analysis is the process of examining and identifying the relationships among financial statement elements and making comparisons with relevant information. The analysis is a powerful tool used by a variety of people like creditors, investors, and managers, etc. who all have different reasons for learning about the financial circumstances of an organization (Financial Statement Analysis, 2014). There are a variety of tools that can be used to evaluate the financial statements data. The three most commonly used tools are the ratio analysis, horizontal analysis, and vertical analysis. In this paper I plan to evaluate these three methods and discuss how the financial information is used to make certain business decisions, while giving an example that may be seen in the health care arena. The ratio analysis is a method of analyzing data to determine the overall financial strength of a business. The broad method by which the financial data is converted into simple mathematic ratios for comparison makes it easy very user friendly. An advantage to this method is that it can be used by anyone with access to organizations public financial statements since the data is widely available. Calculations created from these formulas provide crucial information for decision-making (Ratio Analysis, 2014). Another advantage to the ratio analysis method is that the conversion allows...
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...11/15/2014 SUBJECT: Financial Analysis A detailed financial analysis has been performed on the balance sheet and income statement of Riordan Manufacturing. The purpose of this memo is to explain the results of the analysis and provide an overview of the company’s current financial position. Financial Ratios Financial ratios are essential for analyzing the liquidity and profitability of the company. Based on the 2010 income statement and balance sheet for Riordan Manufacturing the following ratios have been calculated. First, the liquidity ratios tell the proportion of liquid assets to as they relate to current liabilities. These ratios are important because they can show how vulnerable a company is to bankruptcy or insolvency. Next, the profitability ratios show us the level of performance from an operational standpoint. These ratios can be used to find weaknesses and strengths in operational policies at Riordan Manufacturing. Last, the solvency ratios are used to compare the company’s debt to assets. Creditors can determine if a company is a suitable candidate for a loan by using this ratio. |Liquidity Ratios |Solution | |Current Ratio |5.28 | |Acid Test |2.04 | |Receivables Turnover |0 | |Inventory Turnover |6.64 | ...
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...Ratio Vertical and Horizontal Analyses There are three tool in a financial statement, Ratio, Vertical, and Horizontal. Horizontal the first financial tool evaluates the performance of the company from period to period. Horizontal analysis can also be called trend analysis and is used to look over data over a period of time to determine if there were increases or decreases that has taken place. Horizontal analysis is used primarily in intercompany comparisons. Vertical analysis is the second tool used in a financial statement. Vertical analysis can also be called common-size analysis. This tool is used to express each financial statement item as a percent of a base amount. Vertical analysis shows the relative size of each category in the balance sheet. Ratio analysis expresses the relationship among selected items of a financial statement data. Both external and internal will use this tool in determining the growth of the company. Pepsi Co 2005 Ratio 2004 Ratio Current Assets $10,454 Current Assets $8,639 Current Liabilities $9,406 Current Liabilities $6,752 Divide 10,454 by 9,406 = 1.11% Divide 8,639 by 6,752 = 1.28% 2005 Vertical 2004 Vertical ...
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...Week Four Reflections Allyson Bara, Courtney Heiser, Torie Jones, Kristie Laughinghouse, Stefanie Olney, Lynette Plowe ACC/291 Principles of Accounting II April 29, 2013 Professor Beth Baligrosky Week Four Team Reflection In week four, the objectives were define as prepare a statement of cash flows using both direct and indirect methods, apply ratio, vertical, and horizontal analyses to financial statements and prepare journal entries associated with the issuance of preferred and common stocks and the declaration and payment of dividends. Cash flows will identify a company's sources and uses of cash. Companies are required to prepare a statement of cash flows in their annual reports because it contains essential data for others, such as lenders and investors, who make economic decisions about the companies. It shows the bases and uses of cash and is a basis for cash flow analysis. Companies produce and consume cash in different ways, so the cash flow statement is divided into three sections: cash flows from operations, financing and investing. Basically, the sections on operations and financing show how the company gets its cash, while the investing section shows how the company spends its cash. Each section can give you a snap shot of a company’s cash management viewpoint. This can also tell you whether dividends have actually been paid out or whether they are accruing. According to Financial accounting “Operating activities include receipts and payments from normal...
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...| 12 | Appendix B | 13 | Appendix C | 14 | Appendix D | 15 | Appendix E | 15 | Appendix F | 16 | Appendix G | 16 | Appendix H | 17 | Appendix I | 17 | Appendix J | 18 | Appendix K | 18 | Appendix L | 18 | Appendix M | 19 | Appendix N | 19 | Introduction This report analyzes two food industry companies, Cheesecake Factory and Buffalo Wild Wings. Both the income statement and the balance sheet of these two companies was analyzed from the annual reports that these public food industry companies posted onto their websites. The investing and financing activities of both companies was also analyzed. After comparing the two companies, we acted as a potential investor to decide which company was the better option to look at these analyses. Income Statement Analysis Four vital line items on the income statement that would be valued by an investor would be net income, revenues, total costs and expenses, and gross profit. All four line items would be scrutinized by potential investors because they are all pertaining to the cash flows of the respective companies. Investors want to be reassured that their money will be paid back, so if the companies cannot make a profit, then investors will not want to invest in them. These four line items, can help potential investors decide whether or not they would like to invest in said companies. The analysis of these items was conducted on The Cheesecake Factory and Buffalo Wild Wings to help assists the groups decision into which company...
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... 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 against...
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...statement analysis and functions are the horizontal, vertical, and ratio analysis. The horizontal ratio also called the trend ratio, evaluates financial statements and data over a certain period of time. It is mainly used in intra- company comparisons. The purpose of this is to determine the decrease or increase that took place. The vertical analysis also called the common- size analysis, evaluates the financial statement data by expressing each item as a base amount or a percentage in the financial statements. It is used in both inter- and intra- company comparisons. The ratio analysis expresses the relationships among selected items of financial statement data, which is used in all three types of comparisons. So the current ratio for 2004 would be $8639 which is the total assets divided by $6752 the total liabilities, which is equal to 1.28% For 2005 it’s the same scenario divide the current assets $10454 by $9406, (total liabilities) equal to 1.11% The two measures of vertical analysis is current assets or $10,454 $31,727 = 33% (Divide the two to get this amount.) The two measures of horizontal analyses are current assets in 2005- $10,454 Divided by Current assets in 2004- $8,639 = 121% or a 21% increase from 2004 to 2005. Current liabilities in 2005 are $9,406. Divide that by current liabilities in 2004 or $6752 which equals 139% or 39% increase from 04 to 05. For the Coca-Cola Co, to get the current ratio you divide the current assets by the current...
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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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...company's sales, assets, and liabilities have increased, decreased, or stayed the same. The following is an analysis of McDonald’s Corporation 2010 Annual Financial Report, and will compare the financial health of the company, explain why it is worth investing, and provide analyses to support the investment decision. McDonald’s was ranked 111 on Fortune 500’s annual ranking of America’s largest corporations in 2010 (Fortune 500, 2011). The restaurant is one of the largest fast-food chains in the world and experienced many financial highs in 2010. Revenues increased 6% and the guest count rose by 4.9%, in addition to the Company returning $5.1 billion to shareholders (McDonald’s Corporation, 2011, p.11). These are just glimpses of what the organization accomplished over the course of a year. In order to provide more information on McDonald’s financial health analyses were performed and the results were evaluated. There are several tools used to analyze financial statements: vertical analysis, horizontal analysis, and ratio analysis. These analyses help evaluate an organization’s profitability, solvency, and liquidity (Weygandt, Kimmel, & Kieso, 2008). According to Businessdictionary.com (2012), a vertical analysis...
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...WRITING A FINANCIAL STATEMENT ANALYSIS REPORT FOR A POTENTIAL USER The financial analyst should research, analyse and evaluate the company’s consolidated financial results. He/she should then compare such analysis and evaluation with that of a competitor or more working in the same industry group. The competitor should have the similar size (measured by total assets, sales turnover, number of employees, and/or capital employed) of the main company. The competitor should also have the same legal form as that of the main company (e.g. both companies should be Public Limited Company). It is essential that a financial analyst should write out a well-organised and structured financial statements analysis report in an appropriate format and style to an identified user of accounting information, using headings and sub-headings to indicate topics discussed. This report should include the key groups of ratios, and identify the key issues, explanations, and main findings obtained from the calculated ratios, horizontal and vertical analyses, and other sources of information. Then, the analyst should come to appropriate conclusions, implications, limitations, and recommendations. A suggested approach to write a good report is demonstrated below. I. Abstract * Report Objective; * Main Findings. II. Summary of the Basic Company Information Before looking at any of the different analysis techniques, it is good to spend some time doing a little bit of background research...
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...around the world that they enjoy universal recognition for their company and for their products. Historically, these are the major competitors in the “Cola wars”. They both produce flavored water, regular water, and soft soda drinks. Coca-Cola (Coke) and PepsiCo, Inc. (Pepsi) target all income brackets across the globe due to their ability to produce products which they have convinced millions of people are attractive and reasonably priced. This makes people buy them regardless of their income level. We will review these companies’ income statements and balance sheets to reveal the financial condition of the companies in relation to one another. After an introductory discussion of the companies, we will perform vertical and horizontal analyses from their annual report financial data and then will provide recommendations on each company. There are a wide variety of distributors in these markets, but Coke and Pepsi have stayed number one and two for decades. They have reached far beyond their own borders in the U.S. to become a going concern in production and distribution worldwide. They have modeled practices that one another have followed in order that they could overcome any obstacles to worldwide manufacture and distributions. (The Coca Cola Company, 2009). Both of these companies run worldwide operations and they compete globally with one another for customers. They produce...
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...2011-2012 1 Table of Contents: Table of Contents Introduction Horizontal Analysis Vertical Analysis Ratio Analysis – Profitability Ratio Analysis – Efficiency Ratio Analysis – Liquidity Ratio Analysis – Leverage Conclusion & Recommendation Limitations of the Analysis 2 Introduction: Introduction Corporate Facts: Name: Apple Inc. Founded: April 1976 Founders: Steve Jobs Steve Wozniak Ronald Wayne Head Office: Cupertino, California Industry: Computer hardware Computer software Consumer electronics Digital distribution Products: iPhone , iPad , iPod, iMac, Mac Books and other related hardware and software Marketing: Direct: retail and online stores Indirect: resellers & cellular network carriers 3 Introduction: Introduction Reportedly, Apple is one of the most successful technology companies in the world. Apple business strategy focuses on research & development in order to compete in technology world. Based on Forbes (April 2012), Apple’s market capitalization worth $546 billion, which is: Almost twice of Microsoft ($273.5 billion) More than twice of IBM ($238.7 billion) More than twice of General Electric ($213.7 billion) More than twice of Wal-Mart ($208.4 billion) More than twice of Google ($203.2 billion) More than thrice of Coca Cola ($158.8 billion) This value can cover the areas of Phnom Penh and 5 provinces around Tonle Sap Lake (using $100 bill). 4 Horizontal Analysis: Horizontal Analysis Apple’s sales increased steeply by 52% and 66% between...
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