Chapter 20, Problem 2ADM

A.

To determine

Segment Analysis

Business can be classified by regions, products or services, types of customers and more; each classification is treated as one segment of the business. Revenues earned from different segments individually are called segment revenue. Segment revenues are determined from the invoiced data entered into the accounting system. Segment analysis is done to analyze the contribution of different segments to the total operating performance of the company. It is done with the help of horizontal and vertical comparisons.

Horizontal Analysis

This analysis is done to show the trend of various components in financial statements over a period of time. The earliest period is used as the base period and components of financial statements of later periods are compared with the components of the base period.

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.

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

B.

To determine

To interpret: The vertical analysis of five segment of Company WD.

C.

To determine

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

D.

To determine

To interpret: The horizontal segment sales analysis.