Strategic Planning in the Small Business

Unit 2

HO 2-5 (continued)

Table 2-4 Comparative

Balance Sheet Percentages

(Vertical Analysis)

Year 4 Year 3 Year 2

Year I

% % %

Current assets:

Cash

16 17 8

9

Accounts receivable (net)

38 34 31

27

Inventory

28 31

46 39

Prepaid expenses

3 3 4 5

Total current assets

85 85

89 80

Long-term assets:

Equipment, furniture

&fixtures 15 15

11 20

Less accumulated depreciation ....

TOTAL ASSETS

100 100 100

100

Current

liabilities:

Merchandise

payable 8

8 15 12

Operating expenses payable

6 6 9

9

Interest payable

1 1

1 1

Income tax payuble 1

5 1 2

Short-term notes payable 4

8 15 29

Total current

liabilities 20 28

41 53

Long-term liabilities:

Notes payable

15 19 13 0

Owner's equity:

Common sock

26 28 33

39

Retained earnings

39 25 13 8

TOTAL LIABILIIES AND OWNER'S
EQUITY 100 100 100
100

as pe,-centagesof totalsales (Table 2-5).

This procedure provides

a clearer basis for

year-to-year comparisons and enables fluc­

tuations and deviations

to be readily noticed. Operating results

(Table 2-5) suffered in year two as compared

to year one when

cost of goods

sold increased as a percentage of sales

revenue.

PartOne The Analysis Phase

207

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