# Comparative Financial Statement Common Size Comparative Statement

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Comparative Financial Statement Common Size Comparative Statement document sample

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```							                                              Chapter

Statement Analysis: 23
Comparative Statements

Section 1: Vertical Analysis
Section Objectives

1.   Use vertical analysis techniques
to analyze a comparative income
statement and balance sheet.
Phases of Statement Analysis

1. Computation Phase:
   Vertical analysis
   Horizontal analysis
   Trend analysis
2. Interpretation Phase:
QUESTION:

What is vertical analysis?

Vertical analysis is computing the
relationship between each item on a
financial statement to some base
amount on the statement.
QUESTION:

What is horizontal analysis?

Horizontal analysis is computing the
percentage change for individual
items in the financial statements
from year to year.
QUESTION:

What is a financial ratio?

A financial ratio is computing ratio
and percentage relationships of the
current year with those of the
immediately preceding year.
QUESTION:

What is trend analysis?

Trend analysis is a better technique
than just analyzing ratios. It
compares selected ratios and
percentages over a period of time.
Objective 1.

Use Vertical Analysis Techniques To Analyze A
Comparative Income Statement And Balance
Sheet.
Vertical Analysis of the Income
Statement
Each item is expressed as a percentage of the
net sales figure.

Cost of goods sold       \$1,775,000
=              = 59.76%
Net Sales            \$2,970,200

Selling expenses      \$ 525,424
=             = 17.69%
Net Sales         \$ 2,970,200

Net income after taxes   \$ 56,578
=             = 1.9%
Net Sales         \$ 2,970,200
QUESTION:

What are comparative statements?

Comparative statements are
financial statements presented side
by side for two or more years.
QUESTION:

What are common-size statements?

Common-size statements are
financial statements with items
expressed as percentages of a base
amount.
Comparative Statement

California Products, Inc.
Comparative Income Statement
Year Ended December 31, 2008 and 2007

Amounts                 Percent of Net Sales

2008          2007           2008        2007
Revenue
Sales                                  3,105,650       2,850,625       104.6      104.6
Less Sales Returns and Allowances        135,450         125,625         4.6        4.6
Net Sales                           2,970,200       2,725,000       100.0      100.0

Net Income After Income Taxes             56,578            41,250        1.9        1.5
Common-size Statement

California Products, Inc.
Comparative Income Statement
Year Ended December 31, 2008 and 2007

Amounts                 Percent of Net Sales

2008          2007           2008        2007
Revenue
Sales                                  3,105,650       2,850,625       104.6      104.6
Less Sales Returns and Allowances        135,450         125,625         4.6        4.6
Net Sales                           2,970,200       2,725,000       100.0      100.0

Net Income After Income Taxes             56,578            41,250        1.9        1.5
Comparative Common-size Statement

California Products, Inc.
Comparative Income Statement
Year Ended December 31, 2008 and 2007

Amounts                 Percent of Net Sales

2008          2007           2008        2007
Revenue
Sales                                  3,105,650       2,850,625       104.6      104.6
Less Sales Returns and Allowances        135,450         125,625         4.6        4.6
Net Sales                           2,970,200       2,725,000       100.0      100.0

Net Income After Income Taxes             56,578            41,250        1.9        1.5
Vertical Analysis of the Balance
Sheet
Each item is expressed as either a percentage of
total assets or of total liabilities plus stockholders’
equity.
Cash                                 \$108,886
=               = 19.7%
Total assets                            \$553,016

Accounts payable                        \$ 72,090
=               = 13.0%
total liabilities plus stkhldrs’ equity.       \$ 553,016
Total stockholders’ equity                  =   \$311,921    = 56.4%
total liabilities plus stkhldrs’ equity.        \$553,016
SECTION            Complete the following sentences:
R
The first step in financial statement
computation phase
analysis is the _________________.
E

V        Vertical analysis is the relationship of
______________
each item on a financial statement to
I       some base amount on the statement.

E        Horizontal analysis
_________________ is the percentage
change for individual items in the financial
W        statements from year to year.
SECTION           Complete the following sentences:
R
The second step in financial statement
interpretation phase
analysis is the __________________.
E

V
Comparative statements
_____________________ are financial
statements presented side by side for two
I       or more years.

E        The last two columns of comparative
common-size statements express
W                    percentages
numbers as ___________.
Thank You
for using

College Accounting, 11th Edition

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