ABCDE Technologies, INC. Horizontal Analysis of a Balance Sheet December 31, 20X
ID: 2474250 • Letter: A
Question
ABCDE Technologies, INC.
Horizontal Analysis of a Balance Sheet December 31, 20X2 &20X1
December 31, 20X1
December 31, 20X2
Assets:
Current Assets:
Cash and Cash equivalents
$6,181,520.00
$970,446.00
Available - for sale securities
$4,932,763.00
$0.00
Accounting receivable, net of allowance for doubtful accounts of $148,300 and $139,200 at December 31,20X1 and 20X2 respectively
$12,592,231.00
$3,932,170.00
Inventories
$18,229,317.00
$8,609,492.00
Other current Assent
$18,229,317.00
$8,609,492.00
Total Current Asset
$60,165,148.00
$22,121,600.00
ABCDE Technologies, INC.
Horizontal Analysis of Income Statement for the Period Ending
December 31, 20X1
December 31, 20X2
December 31, 20X3
Sales
$37,847,681.00
$12,445,015.00
$8,213,236.00
Cost of good sold
$15,895,741.00
$6,832,927.00
$4,523,186.00
Gross margin
$21,951,940.00
$5,612,088.00
$3,690,050.00
Based on the above information about ABCDE Technology, Inc. Calculate using Horizontal analysis and determine the red flags that exist in this financial statement. Describe the scenarios that might contain these symptoms.
ABCDE Technologies, INC.
Horizontal Analysis of a Balance Sheet December 31, 20X2 &20X1
December 31, 20X1
December 31, 20X2
Assets:
Current Assets:
Cash and Cash equivalents
$6,181,520.00
$970,446.00
Available - for sale securities
$4,932,763.00
$0.00
Accounting receivable, net of allowance for doubtful accounts of $148,300 and $139,200 at December 31,20X1 and 20X2 respectively
$12,592,231.00
$3,932,170.00
Inventories
$18,229,317.00
$8,609,492.00
Other current Assent
$18,229,317.00
$8,609,492.00
Total Current Asset
$60,165,148.00
$22,121,600.00
ABCDE Technologies, INC.
Horizontal Analysis of Income Statement for the Period Ending
December 31, 20X1
December 31, 20X2
December 31, 20X3
Sales
$37,847,681.00
$12,445,015.00
$8,213,236.00
Cost of good sold
$15,895,741.00
$6,832,927.00
$4,523,186.00
Gross margin
$21,951,940.00
$5,612,088.00
$3,690,050.00
Explanation / Answer
ABCDE Technologies, INC. Horizontal Analysis of a Balance Sheet December 31, 20X2 &20X1 December 31, 20X1 December 31, 20X2 Increase /(decrease) Amount % A B C = B-A C/A*100 Assets: Current Assets: Cash and Cash equivalents 6181520 970446 -5211074 -84.30 Available - for sale securities 4932763 0 -4932763 -100.00 Accounting receivable, net of allowance for doubtful accounts of $148,300 and $139,200 at December 31,20X1 and 20X2 respectively 12592231 3932170 -8660061 -68.77 Inventories 18229317 8609492 -9619825 -52.77 Other current Assent 18229317 8609492 -9619825 -52.77 Total Current Asset 60165148 22121600 -38043548 -63.23 ABCDE Technologies, INC. Horizontal Analysis of Income Statement for the Period Ending December 31, 20X1 Base Year December 31, 20X2 December 31, 20X3 Increase /(decrease) 2012 Increase /(decrease) 2013 Amount % Amount % A B C D = B-A D/A*100 E = C -A E/A*100 Sales 37847681 12445015 8213236 -25402666 -67.12 -29634445 -78.30 Cost of good sold 15895741 6832927 4523186 -9062814 -57.01 -11372555 -71.54 Gross margin 21951940 5612088 3690050 -16339852 -74.43 -18261890 -83.19 Based on the above horizontal analysis , Of Balance Sheet , the red flags are in all current assets All current assets are reducing from 2011 to 2012 The percentage decrease of current assets are also significant This is a cause of concern as such sharp decline in assets does not give a healthy picture of the company This decrease puts questions on the longevity of the company Based on horizontal analysis of Income statement for 3 years It has been shown that the sales are reducing dramatically over the years.In line with dropping of sale , cost of goods sold and gross profit is also declining. The decline in revenue is a red flag for the company as relinevenue is the backbone of any company. Dec Decline in revenue signifies problems in the company
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