Chapter 17, Problem 1BPSB

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 1BPSB

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

TRIPOLY COMPANY
Comparative Income Statement Trend %
For the Years Ended December 31
$ thousands	2019	2018	2017	2016	2015	2014	2013
Sales Trend %	65.1%	70.9%	73.3%	79.1%	86.0%	89.5%	100.0%
Cost of Goods Sold Trend %	72.6%	76.3%	77.4%	82.6%	89.5%	92.1%	100.0%
Gross profit Trend %	59.2%	66.7%	70.0%	76.3%	83.3%	87.5%	100.0%
Operating expenses Trend %	56.0%	69.3%	74.7%	84.0%	93.3%	96.0%	100.0%
Net income Trend %	60.6%	65.5%	67.9%	72.7%	78.8%	83.6%	100.0%
TRIPOLY COMPANY
Comparative Year End Balance Sheet Trend %
$ thousands	2019	2018	2017	2016	2015	2014	2013
Assets:
Cash Trend %	64.7%	67.6%	76.5%	79.4%	88.2%	91.2%	100.0%
Accounts Receivable, net Trend %	81.3%	85.0%	87.5%	90.0%	93.8%	96.3%	100.0%
Merchandise Inventory Trend %	79.8%	82.7%	85.6%	86.5%	89.4%	91.3%	100.0%
Other Current assets Trend %	85.0%	85.0%	90.0%	90.0%	95.0%	100.0%	100.0%
Long term Investments Trend %	32.7%	27.3%	23.6%	100.0%	100.0%	100.0%	100.0%
Plant Assets, net Trend %	112.3%	113.2%	114.5%	90.7%	92.5%	94.3%	100.0%
Total Assets Trend %	88.5%	89.6%	91.5%	90.2%	92.7%	94.6%	100.0%
Liabilities and Equity:
Current Liabilities Trend %	52.9%	55.7%	66.4%	67.9%	75.0%	92.9%	100.0%
Long term liabilities Trend %	35.4%	46.2%	54.6%	56.9%	74.6%	82.3%	100.0%
Common Stock Trend %	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Other Paid in capital Trend %	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Retained earnings Trend %	166.7%	157.8%	145.9%	137.0%	122.2%	103.7%	100.0%
Total Liabilities and equity Trend %	88.5%	89.6%	91.5%	90.2%	92.7%	94.6%	100.0%

Explanation of Solution

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

TRIPOLY COMPANY
Comparative Income Statement Trend %
For the Years Ended December 31
$ thousands	2019	2018	2017	2016	2015	2014	2013
Sales	560	610	630	680	740	770	860
Sales Trend %	65.1%	70.9%	73.3%	79.1%	86.0%	89.5%	100.0%
Cost of Goods Sold	276	290	294	314	340	350	380
Cost of Goods Sold Trend %	72.6%	76.3%	77.4%	82.6%	89.5%	92.1%	100.0%
Gross profit	284	320	336	366	400	420	480
Gross profit Trend %	59.2%	66.7%	70.0%	76.3%	83.3%	87.5%	100.0%
Operating expenses	84	104	112	126	140	144	150
Operating expenses Trend %	56.0%	69.3%	74.7%	84.0%	93.3%	96.0%	100.0%
Net income	200	216	224	240	260	276	330
Net income Trend %	60.6%	65.5%	67.9%	72.7%	78.8%	83.6%	100.0%
TRIPOLY COMPANY
Comparative Year End Balance Sheet Trend %
$ thousands	2019	2018	2017	2016	2015	2014	2013
Assets:
Cash	44	46	52	54	60	62	68
Cash Trend %	64.7%	67.6%	76.5%	79.4%	88.2%	91.2%	100.0%
Accounts Receivable, net	130	136	140	144	150	154	160
Accounts Receivable, net Trend %	81.3%	85.0%	87.5%	90.0%	93.8%	96.3%	100.0%
Merchandise Inventory	166	172	178	180	186	190	208
Merchandise Inventory Trend %	79.8%	82.7%	85.6%	86.5%	89.4%	91.3%	100.0%
Other Current assets	34	34	36	36	38	40	40
Other Current assets Trend %	85.0%	85.0%	90.0%	90.0%	95.0%	100.0%	100.0%
Long term Investments	36	30	26	110	110	110	110
Long term Investments Trend %	32.7%	27.3%	23.6%	100.0%	100.0%	100.0%	100.0%
Plant Assets, net	510	514	520	412	420	428	454
Plant Assets, net Trend %	112.3%	113.2%	114.5%	90.7%	92.5%	94.3%	100.0%
Total Assets	920	932	952	938	964	984	1040
Total Assets Trend %	88.5%	89.6%	91.5%	90.2%	92.7%	94.6%	100.0%
Liabilities and Equity:
Current Liabilities	148	156	186	190	210	260	280
Current Liabilities Trend %	52.9%	55.7%	66.4%	67.9%	75.0%	92.9%	100.0%
Long term liabilities	92	120	142	148	194	214	260
Long term liabilities Trend %	35.4%	46.2%	54.6%	56.9%	74.6%	82.3%	100.0%
Common Stock	160	160	160	160	160	160	160
Common Stock Trend %	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Other Paid in capital	70	70	70	70	70	70	70
Other Paid in capital Trend %	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%	100.0%
Retained earnings	450	426	394	370	330	280	270
Retained earnings Trend %	166.7%	157.8%	145.9%	137.0%	122.2%	103.7%	100.0%
Total Liabilities and equity	920	932	952	938	964	984	1040
Total Liabilities and equity Trend %	88.5%	89.6%	91.5%	90.2%	92.7%	94.6%	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:

The major financial statement trends over the period

Answer to Problem 1BPSB

1. Sales has decreased over this period
2. Net income has decreased over this period
3. Total Assets have Decreased over this period

Hence the overall trend is decreasing.

Explanation of Solution

The explanation for each trend is shows as below:

$ thousands	2019	2018	2017	2016	2015	2014	2013
Sales Trend %	65.1%	70.9%	73.3%	79.1%	86.0%	89.5%	100.0%

$ thousands	2019	2018	2017	2016	2015	2014	2013
Net income Trend %	60.6%	65.5%	67.9%	72.7%	78.8%	83.6%	100.0%

$ thousands	2019	2018	2017	2016	2015	2014	2013
Total Assets Trend %	88.5%	89.6%	91.5%	90.2%	92.7%	94.6%	100.0%

Hence,

1. Sales has decreased over this period
2. Net income has decreased over this period
3. Total Assets have Decreased over this period