Submitted by: Submitted by isinsusavas
Views: 10
Words: 2575
Pages: 11
Category: Business and Industry
Date Submitted: 05/13/2016 10:05 AM
To make informed decisions about a company
Helpful in managing the company
Comparison with competition
Charting a company’s progress, measure
performance
Establish financial health
Used for investment decisions
Generally based on comparative financial data
From one year to the next
With a competing company
With the industry as a whole.
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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
Three main ways to analyze financial statements
Horizontal analysis
Year-to-year comparison
Vertical analysis
Compare different companies
Using industry averages
Compare company’s performance against the
industry averages
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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
The study of percentage changes in comparative
statements
Compute dollar changes
Compute percentage changes
3
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
Step 1
Step 2
4
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
5
Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
Form of horizontal analysis
Indicates business direction
How have things changed over the years?
Select a period of three to five years
Base year, earliest year, is selected and set equal
to 100%
Subsequent years expressed as a percentage of
the base period
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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.
Data for Mariner Designs, Inc., follow:
MARINER DESIGNS, INC.
Comparative Income Statement
Years Ended December 31, 2012 and 2011
2011
Net sales revenue
2012
$ 431,000
$ 372,350
$ 200,000
$ 187,550
99,000
91,050
Other expense
8,350
6,850
Total expenses
$ 307,350
$ 285,450
$ 123,650
$ 86,900
Expenses:
Cost of goods sold
Selling and general expenses
Net income
1. Prepare a horizontal analysis of the comparative income statement of Mariner
Designs, Inc. Round...