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.

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Answer 1

Question

Chapter 6, Problem 4ADM

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

To interpret: The vertical analysis of the segment sale of Company LM.

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

E.

To determine

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

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Answer 2

Question

Chapter 6, Problem 4ADM

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

To interpret: The vertical analysis of the segment sale of Company LM.

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

E.

To determine

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

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Answer 3

Question

Chapter 6, Problem 4ADM

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

To interpret: The vertical analysis of the segment sale of Company LM.

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

E.

To determine

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

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Answer 4

Question

Chapter 6, Problem 4ADM

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

To interpret: The vertical analysis of the segment sale of Company LM.

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

E.

To determine

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

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Answer 5

Chapter 6, Problem 4ADM

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

To interpret: The vertical analysis of the segment sale of Company LM.

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

E.

To determine

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

Answer 6

Chapter 6, Problem 4ADM

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.

Answer 7

Chapter 6, Problem 4ADM

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.

Answer 8

B.

To determine

To interpret: The vertical analysis of the segment sale of Company LM.

Answer 9

B.

To determine

To interpret: The vertical analysis of the segment sale of Company LM.

Answer 10

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

Answer 11

C.

To determine

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

Answer 12

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

Answer 13

D.

To determine

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

Answer 14

E.

To determine

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

Answer 15

E.

To determine

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

Answer 16

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Answer 17

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Answer 18

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Answer 19

Ch. 6 - What types of costs are customarily included in...Ch. 6 - Which type of manufacturing cost (direct...Ch. 6 - Which of the following costs would be included in...Ch. 6 - In the variable costing income statement, how are...Ch. 6 - Prob. 5DQ Ch. 6 - Discuss how financial data prepared on the basis...Ch. 6 - Prob. 7DQ Ch. 6 - Explain why rewarding sales personnel on the basis...Ch. 6 - Prob. 9DQ Ch. 6 - Prob. 10DQ

Solution Summary: The author explains how vertical analysis is useful for evaluating company's performance and financial condition.

To interpret: The vertical analysis of the segment sale of Company LM.

(1) EBITDA, and (2) EBITDA as a percent of sales (EBITDA margin) for each segment.

To prepare: A column bar chart of the EBITDA as a percent of sales for the descending order.

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

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Chapter 6 Solutions