Chapter 17, Problem 1APSA

To determine

Concept Introduction:

Financial Statement analysis is done using the components of financial statement. These components are Balance sheet, Income statement, Statement of Cash flows etc. Annual report of a company contains financial statement of that year and previous year for comparison. If the company has subsidiaries or segments, the financial statement shall be consolidated for whole business of the company.

Requirement-1:

To Calculate:

Trend Percents for all components of both statements using 2013 as base year

Answer to Problem 1APSA

Trend Percents for all components of both statements using 2013 as base year are as follows:

HAROUN COMPANY
Comparative Income Statement Trend %
For the Years Ended December 31
$ thousands	2019	2018	2017	2016	2015	2014	2013
Sales Trend %	182.5%	161.2%	147.6%	136.2%	127.8%	119.6%	100.0%
Cost of Goods Sold Trend %	212.6%	176.1%	153.9%	136.9%	128.3%	121.2%	100.0%
Gross profit Trend %	131.0%	135.7%	136.8%	135.1%	126.9%	117.0%	100.0%
Operating expenses Trend %	279.7%	216.9%	198.3%	144.1%	123.7%	122.0%	100.0%
Net income Trend %	52.7%	92.9%	104.5%	130.4%	128.6%	114.3%	100.0%
HAROUN COMPANY
Comparative Year End Balance Sheet Trend %
$ thousands	2019	2018	2017	2016	2015	2014	2013
Assets:
Cash Trend %	65.2%	87.6%	92.1%	94.4%	98.9%	96.6%	100.0%
Accounts Receivable, net Trend %	226.9%	238.0%	215.7%	166.7%	147.2%	139.8%	100.0%
Merchandise Inventory Trend %	298.9%	221.8%	195.8%	167.8%	152.2%	131.7%	100.0%
Other Current assets Trend %	400.0%	355.6%	155.6%	377.8%	311.1%	311.1%	100.0%
Long term Investments Trend %	0.0%	0.0%	0.0%	100.0%	100.0%	100.0%	100.0%
Plant Assets, net Trend %	278.6%	277.8%	241.7%	130.2%	134.9%	118.6%	100.0%
Total Assets Trend %	246.8%	222.3%	195.4%	144.4%	138.6%	124.0%	100.0%
Liabilities and Equity:
Current Liabilities Trend %	432.6%	369.5%	254.6%	324.1%	193.6%	185.1%	100.0%
Long term liabilities Trend %	323.5%	285.0%	278.0%	142.5%	145.0%	155.0%	100.0%
Common Stock Trend %	153.8%	153.8%	153.8%	130.8%	130.8%	100.0%	100.0%
Other Paid in capital Trend %	166.7%	166.7%	166.7%	113.3%	113.3%	100.0%	100.0%
Retained earnings Trend %	213.2%	179.2%	137.7%	124.5%	109.4%	91.2%	100.0%
Total Liabilities and equity Trend %	246.8%	222.3%	195.4%	144.4%	138.6%	124.0%	100.0%

Explanation of Solution

Trend Percents for all components of both statements using 2013 as base year are calculated as follows:

HAROUN COMPANY
Comparative Income Statement Trend %
For the Years Ended December 31
$ thousands	2019	2018	2017	2016	2015	2014	2013
Sales	1694	1496	1370	1264	1186	1110	928
Sales Trend %	182.5%	161.2%	147.6%	136.2%	127.8%	119.6%	100.0%
Cost of Goods Sold	1246	1032	902	802	752	710	586
Cost of Goods Sold Trend %	212.6%	176.1%	153.9%	136.9%	128.3%	121.2%	100.0%
Gross profit	448	464	468	462	434	400	342
Gross profit Trend %	131.0%	135.7%	136.8%	135.1%	126.9%	117.0%	100.0%
Operating expenses	330	256	234	170	146	144	118
Operating expenses Trend %	279.7%	216.9%	198.3%	144.1%	123.7%	122.0%	100.0%
Net income	118	208	234	292	288	256	224
Net income Trend %	52.7%	92.9%	104.5%	130.4%	128.6%	114.3%	100.0%
HAROUN COMPANY
Comparative Year End Balance Sheet Trend %
$ thousands	2019	2018	2017	2016	2015	2014	2013
Assets:
Cash	58	78	82	84	88	86	89
Cash Trend %	65.2%	87.6%	92.1%	94.4%	98.9%	96.6%	100.0%
Accounts Receivable, net	490	514	466	360	318	302	216
Accounts Receivable, net Trend %	226.9%	238.0%	215.7%	166.7%	147.2%	139.8%	100.0%
Merchandise Inventory	1838	1364	1204	1032	936	810	615
Merchandise Inventory Trend %	298.9%	221.8%	195.8%	167.8%	152.2%	131.7%	100.0%
Other Current assets	36	32	14	34	28	28	9
Other Current assets Trend %	400.0%	355.6%	155.6%	377.8%	311.1%	311.1%	100.0%
Long term Investments	0	0	0	146	146	146	146
Long term Investments Trend %	0.0%	0.0%	0.0%	100.0%	100.0%	100.0%	100.0%
Plant Assets, net	2020	2014	1752	944	978	860	725
Plant Assets, net Trend %	278.6%	277.8%	241.7%	130.2%	134.9%	118.6%	100.0%
Total Assets	4442	4002	3518	2600	2494	2232	1800
Total Assets Trend %	246.8%	222.3%	195.4%	144.4%	138.6%	124.0%	100.0%
Liabilities and Equity:
Current Liabilities	1220	1042	718	914	546	522	282
Current Liabilities Trend %	432.6%	369.5%	254.6%	324.1%	193.6%	185.1%	100.0%
Long term liabilities	1294	1140	1112	570	580	620	400
Long term liabilities Trend %	323.5%	285.0%	278.0%	142.5%	145.0%	155.0%	100.0%
Common Stock	1000	1000	1000	850	850	650	650
Common Stock Trend %	153.8%	153.8%	153.8%	130.8%	130.8%	100.0%	100.0%
Other Paid in capital	250	250	250	170	170	150	150
Other Paid in capital Trend %	166.7%	166.7%	166.7%	113.3%	113.3%	100.0%	100.0%
Retained earnings	678	570	438	396	348	290	318
Retained earnings Trend %	213.2%	179.2%	137.7%	124.5%	109.4%	91.2%	100.0%
Total Liabilities and equity	4442	4002	3518	2600	2494	2232	1800
Total Liabilities and equity Trend %	246.8%	222.3%	195.4%	144.4%	138.6%	124.0%	100.0%

To determine

Concept Introduction:

Financial Statement analysis is done using the components of financial statement. These components are Balance sheet, Income statement, Statement of Cash flows etc. Annual report of a company contains financial statement of that year and previous year for comparison. If the company has subsidiaries or segments, the financial statement shall be consolidated for whole business of the company.

Requirement-2:

To Indicate:

1. If sales grow steadily over this period
2. If net income as grow over the past years
3. If inventory increased over this period

Answer to Problem 1APSA

1. Sales grew steadily over this period
2. Net income did not grow over the past years
3. Inventory has increased over this period

Explanation of Solution

The explanation for each trend is shows as below:

$ thousands	2019	2018	2017	2016	2015	2014	2013
Sales Trend %	182.5%	161.2%	147.6%	136.2%	127.8%	119.6%	100.0%

$ thousands	2019	2018	2017	2016	2015	2014	2013
Net income Trend %	52.7%	92.9%	104.5%	130.4%	128.6%	114.3%	100.0%

$ thousands	2019	2018	2017	2016	2015	2014	2013
Merchandise Inventory Trend %	298.9%	221.8%	195.8%	167.8%	152.2%	131.7%	100.0%

Hence,

1. Sales grew steadily over this period
2. Net income did not grow over the past years
3. Inventory has increased over this period