Accounting and Finance Foundations

Unit 11

Accounting and Finance Foundations Unit 11: Financial Analysis 881

Financial AnalysisOpen-Response Unit Assessment

Skill Standards

Academic:

AD 1 Perform basic and higher level math operations (e.g., addition, subtraction, multiplication, division,

decimals, fractions, units of conversion, averaging, percentage, proportion, ratios)

AD 4 Use tables, graphs, diagrams, and charts to obtain or convey information

Accounting:

OE 13 Use financial statements to analyze business financial conditions

OE 15 Recognize the primary areas of analysis (e.g., trend analysis, profitability, liquidity) and explain the

information obtained from each analysis

OE 16 Perform a horizontal and vertical analysis of the income statement and balance sheet

Scenario

You are a professional financial analyst, and the ABC Company has hired you to evaluate changes in its

financial performance. You are in the midst of developing a comparative income statement:

S/T Guide

20XX ( $) 20YY ( $) Increase or (Decrease)

Amount Percent

Sales (Total Units) 1,525,958 1,221,526 %

Cost of Goods Sold 995,234 752,241 %

Gross Profit 530,724 469,285 %

Selling Expenses 151,000 121,000 %

General Expenses 132,255 119,219 %

Total Operating Expenses 283,255 240,219 %

Operating Income 247,469 229,066 %

Other Income 2,500 1,250 %

249,969 230,316 %

Other Expenses 12,221 11,265 %

Net Income 237,748 219,051 %

ABC Company

Comparative Income Statement for Years Ending

De ce mbe r 31, 20XX and 20YY