D. Grab Bag- In 2006 Tokamak Home Generators had assets of $3,950,000 and total liabilities of $3,454,000. In 2007 the company
had assets of $4,508,000 and liabilities totaling $3,299,995. Complete a horizontal analysis of the company’s balance
sheet. - In 2007 Tokamak Home Generators had assets of $4,508,000 and liabilities totaling $3,299,995. Complete a vertical
analysis of the company’s balance sheet.
E. Additional Exercise- a. Suppose that MinusCo’s balance sheet lists assets of $467,925 and liabilities of $678,900. What is the owners’
equity?
b. If the company sold off all of its assets, would it have enough money to cover all of its liabilities?
12.3 Financial Ratios
In the previous sections, we introduced the basics of accounting statements, and considered
some ways of analyzing their contents, such as vertical and horizontal analysis. In this sec-
tion we will define and discuss the interpretation of certain financial ratios, measurements
derived from items on financial statements that can be used as a tool for summarizing and
analyzing certain aspects of a business’s financial strength.12.3 Financial Ratios 507Copyright © 2008, The McGraw-Hill Companies, Inc.