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Week 7 Checkpoint: Ratio, Vertical, and Horizontal Analyses

In: Business and Management

Submitted By JnEthan
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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 31727

Horizontal Analysis Current year amount = Current results in relation to base period Base year amount

Two measures of horizontal analysis:
Current Assets 2005 
= 10454 = 121% or a 21% increase in assets from 2004 to 2005.
Current Assets 2004 8639

Current Liabilities 2005 = 9406 = 139% or a 39% increase in liabilities from 2004 to 2005.
Current

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