Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 14 Financial Statement Analysis 661

a. Prepare a comparative income statement for fiscal years 2003 and 2004 in vertical form,

stating each item as a percent of revenues. Round to one decimal place.

b. Comment on the significant changes.

Revenue and expense data for the current calendar year for Horizon Publishing Company and

for the publishing industry are as follows. The Horizon Publishing Company data are expressed

in dollars. The publishing industry averages are expressed in percentages.

Horizon Publishing

Publishing Industry

Company Average

Sales $1,414,000 101.0%

Sales returns and allowances 14,000 1.0

Cost of goods sold 504,000 40.0

Selling expenses 574,000 39.0

Administrative expenses 154,000 10.5

Other income 16,800 1.2

Other expense 23,800 1.7

Income tax expense 56,000 4.0

a. Prepare a common-size income statement comparing the results of operations for Horizon

Publishing Company with the industry average. Round to one decimal place.

b. As far as the data permit, comment on significant relationships revealed by the comparisons.

Balance sheet data for Santa Fe Tile Company on December 31, the end of the fiscal year, are as

follows:

2007 2006

Current assets $260,000 $200,000

Property, plant, and equipment 500,000 450,000

Intangible assets 40,000 50,000

Current liabilities 170,000 150,000

Long-term liabilities 210,000 200,000

Common stock 50,000 50,000

Retained earnings 370,000 300,000

Goal 1

a. Fiscal year 2004 income
from continuing operations,
26.7% of revenues

Exercise 14-3

Common-size income
statement

Goal 1

a. Horizon net income:
$105,000; 7.5% of sales

Exercise 14-4

Vertical analysis of balance
sheet

Goal 1

Retained earnings, Dec. 31,
2007, 46.25%

Speedway Motorsports, Inc.

Comparative Income Statement (in millions of dollars)

For the Years Ended December 31, 2004 and 2003

2004 2003

Revenues:

Admissions $156.7 $150.2

Event-related revenue 137.1 127.1

NASCAR broadcasting revenue 110.0 90.7

Other operating revenue 42.7 36.5

Total revenues $ 446.5 $ 404.5

Expenses and other:

Direct expense of events $ 81.4 $ 78.0

NASCAR purse and sanction fees 78.4 69.7

Other direct operating expense 37.7 32.3

General and administrative 65.1 58.7

Depreciation and amortization 35.6 33.9

Other expenses 28.9 35.2

Total expenses and other $ 327.1 $ 307.8

Income from continuing operations $ 119.4 $ 96.7