Chapter 20, Problem 1ADM

A.

To determine

Vertical analysis

Vertical analysis is the method of financial statement analysis, and it is useful for evaluating company’s performance and financial condition. Vertical analysis is helpful for analyzing the changes in the financial statements over the time, and comparing each item on a financial statement with a total amount from the same statement.

EBITDA:

EBITA is operating income that is expressed by adding back depreciation and amortization expenses. This amount termed as Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA). In the EBITDA calculation, fixed expenses and non-cash items are not considered.

To prepare: A vertical analysis of the sales as a percent of total sales for the five segments.

B.

To determine

The earnings before interest, taxes, depreciation, and amortization (EBITDA) for the five segments.

C.

To determine

  The EBITDA as a percent of sales (EBITDA margin) for the five segments.

D.

To determine

To interpret: The analysis in EBITDA margin calculated in Part C.