Accounting and Finance Foundations

Unit 11

Accounting and Finance Foundations Unit 11: Financial Analysis 832

Financial Analysis

Chapter 23

Horizontal Analysis – Calculate the increase or decrease for each item. Then, express each increase/decrease as a

percentage. After determining each increase/decrease, determine whether each change is favorable (F), unfavorable (U), or

neutral (N)—but only for the five shaded lines.

Clark Corporation

Comparative Income Statement

For the Years Ended December 31, 20XX and 20YY

20XX 20YY

Increase (Decrease)

(from 20YY to 20XX)

Amount Percentage Favorable (F) / Unfavorable

(U) / Neutral (N)

Revenue:

Net Sales 406,500 346,800

Cost of Merchandise Sold:

Merchandise Inventory, Jan. 1 100,800 95,700

+ Net Purchases 316,600 250,300

= Merchandise Available for Sale 417,400 346,000

• Merchandise Inventory, Dec. 31 148,700 100,800
  = Cost of Merchandise Sold 268,700 245,200
  Gross Profit on Sales 137,800 101,600
  Operating Expenses:
  Selling Expenses 89,750 75,000
  Administrative Expenses 21,050 10,200
  Total Operating Expenses 110,800 85,200
  Operating Income 27,000 16,400
  Federal Corporate Income Tax Expense 7,100 2,500
  Net Income 19,900 13,900

23.3.3 Vertical, Horizontal, Ratio, & Industry Analyses (cont’d)

Clark Corporation (cont’d)

Student Assignment