Chapter 13, Problem 2PSA

1.

To determine

Introduction: Financial ratios help in comparing the performance of the company with its previous performance as well as that of competitors in the industry. They are divided into four building blocks. These blocks are liquidity and efficiency, solvency, profitability, and market prospects.

The current ratio.

2.

To determine

Introduction: Vertical analysis is done as a comparison or defining the relationship between the items of the same year. The representation is done vertically by determining the relative contribution made by each item to a particular item of the same year.

To prepare: The common-size percent.

3.

To determine

Introduction: Trend analysis represents the trend percents patterns in data across periods. It considers the previous period as the base period and compares the data trend across periods. Trend percent is computed as follows:

  $\text{Trend percent}=\frac{\text{Analysis period amount}}{\text{Base period amount}}\times 100$

The trend analysis for the balance sheet.

4.

To determine

Introduction: Vertical analysis is done as a comparison or defining of the relationship between the items of the same year. The representation is done vertically by determining the relative contribution made by each item to a particular item of the same year.

The portion cost of goods sold to make up for sales is a greater portion or not, income as a percent of sales improve in the most recent year or not, and the growth of plant assets over the period.