Financial Statement Analysis Problem: Please refer to Problem 14-6 on page 755 i

Question

Financial Statement Analysis Problem: Please refer to Problem 14-6 on page 755 in the textbook. Perform a vertical and horizontal analysis of the Corbin Company's Income Statements and Balance Sheets. Comment on what you feel are the 4 most significant issues present in, first, the Balance Sheets and, then, the Income Statements (8 issues altogether). Use an Excel spreadsheet to perform the calculations. Ignore the problem's request for ratios. Just use the financial information to perform your FSA. Limit your text to no more than 3 pages.

Explanation / Answer

Answer:-

!) Increase in Net profit not much.

2) there is Increase in Cost as compared to increase in net profit.

3) The cost of goods sold is slightly low.

4) Selling Cost needs to be in control.

5) Cash needs to be more.

6) Liquidity of cash needs to be more in the company.

Statement of Balance sheet as per horizontal Approach Particulars 2014 2015 Increase/decrease % Cash 18000 21000 3000 16.67 Short term Investment 15000 18000 3000 20.00 account receivable 74000 91000 17000 22.97 Inventory 70000 85000 15000 21.43 Plant 488800 558600 69800 14.28 Statement of Income Statement as per horizontal Approach Particulars 2014 2015 Increase/decrease % Sales 520000 595000 75000 14.42 Cost of goods sold 354000 415000 61000 17.23 S&A 114800 120800 6000 5.23 Interest 6000 7800 1800 30.00 Income Tax 14000 15000 1000 7.14 488800 558600 69800 14.28 Gross Income 31200 36400 5200 16.67

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