The comparative financials of Stargel Inc is as follows. At December 31, 2015, S
ID: 2545003 • Letter: T
Question
The comparative financials of Stargel Inc is as follows. At December 31, 2015, Stargel inventory was $200 and the total equity was $165. Stargel Inc. Comparative Balance Sheet December 31, 2017 and 2016 2017 2016 Assets Cash............................................................................ 400 300 Accounts Receivable................................................. 290 350 Inventory.................................................................... 150 220 Total Assets..................................................... 840 870 Liabilities Accounts Payable...................................................... 140 75 Loan Payable.............................................................. 450 600 Total Liabilities................................................ 590 375 Stockholders’ Equity Common Stock.......................................................... 40 40 Retained Earnings..................................................... 210 155 Total Stockholders’ Equity................................ 250 195 Total Liabilities and Stockholders’ Equity........... 840 870 Stargel Inc. Comparative Income Statement For the Years ending December 31, 2017 and 2016 2017 2016 Sales Revenue............................................................ 1,200 1,000 Less Cost of Goods Sold............................................ 800 600 Gross Profit................................................................ 400 400 Insurance Expenses................................................... 200 190 Interest Expense........................................................ 60 80 Net Income................................................................ 140 130
Instructions:
a. Prepare a horizontal analysis of Stargel’s financial statements indicating the increase and decrease.
b. Prepare a vertical analysis of Stargel’s financial statements.
c. Determine the inventory turnover for both years
d. Determine the rate of return on stockholders’ equity ratio for both years
Explanation / Answer
a. HORIZONTAL ANALYSIS A B C=A-B D=(C/B)*100 Dec 2017 Dec 2016 Increase or (decrease) Amount Percent Cash $400 $300 $100 33.33% Receivable $290 $350 ($60) -17.14% Inventory $150 $220 ($70) -31.82% Assets $840 $870 ($30) -3.45% Total Assets $1,680 $1,740 ($60) -3.45% Payable (Loan) $140 $75 $65 86.67% Payable (Total) $450 $600 ($150) -25.00% Liabilities $590 $375 $215 57.33% Stockholders Equity (Common stock) $40 $40 $0 0.00% Retained Earnings $210 $155 $55 35.48% Total stockholders equity $250 $195 $55 28.21% Total liabilities and stockholders equity $840 $870 ($30) -3.45% A B C=A-B D=(C/B)*100 YEAR 2017 YEAR2016 Increase or (decrease) Amount Percent Revenue $1,200 $1,000 $200 20.00% Cost of goods sold $800 $600 $200 33.33% Profit $400 $400 $0 0.00% Insurance expense $200 $190 $10 5.26% Interest expense $60 $80 ($20) -25.00% Net Income $140 $130 $10 7.69% b VERTICAL ANALYSIS A B=(A/total assets)*100 C D=(C/total assets)*100 Dec 31 2017 Dec 31, 2016 Amount Percent Amount Percent Cash $400 23.81% $300 17.24% Receivable $290 17.26% $350 20.11% Inventory $150 8.93% $220 12.64% Assets $840 50.00% $870 50.00% Total Assets $1,680 100.00% $1,740 100.00% Payable (Loan) $140 8.33% $75 4.31% Payable (Total) $450 26.79% $600 34.48% Liabilities $590 35.12% $375 21.55% Stockholders Equity (Common stock) $40 2.38% $40 2.30% Retained Earnings $210 12.50% $155 8.91% Total stockholders equity $250 14.88% $195 11.21% Total liabilities and stockholders equity $840 50.00% $870 50.00% YEAR 2017 YEAR 2016 A B=(A/Revenue)*100 C D=(C/Revenue)*100 YEAR 2017 YEAR2016 Amount Percent Amount Percent Revenue $1,200 100.00% $1,000 100.00% Cost of goods sold $800 66.67% $600 60.00% Profit $400 33.33% $400 40.00% Insurance expense $200 16.67% $190 19.00% Interest expense $60 5.00% $80 8.00% Net Income $140 11.67% $130 13.00% c INVENTORY TURNOVER Year2017 Year2016 A Sales $1,200 $1,000 B Beginning Inventory $220 $200 C Ending Inventory $150 $220 D=(B+C)/2 Average Inventory $ 185 $ 210 E=A/D INVENTORY TURNOVER 6.49 4.76 d RATE OF RETURN ON STOCKHOLDERS EQUITY Year2017 Year2016 A Net Income $140 $130 B Beginning stockholders equity $195 $165 C Ending stockholders equity $250 $195 D=(B+c)/2 Average stockholders equity $ 223 $ 180 E=A/D Rate of Return on stockholder equity 0.63 0.72 Rate of return in percent 62.92% 72.22%