Financial Statement Analysis

 

Using the financial statements that you have prepared for Smith Manufacturing; prepare the following analyses in Excel:

• Horizontal analysis
• Vertical analysis
• Ratio analysis – calculate a minimum of five ratios

In addition to the numerical calculations, prepare a Word document that contains a brief written analysis of your findings. For example, is this company struggling, doing well, etc.

Trial Balance

– Current Year

Trial Balance

XX

50,000

(due in 10 months, 5%)

500,000

150,000

2,123,500

Smith Manufacturing, Inc.

December 31, 2

0

DR

CR

Cash

362,750

Accounts receivable

320,750

Allowance for uncollectible accounts

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5,000

Prepaid insurance

10,000

Inventory

30,000

Land

50,000

Building

150,000

Accumulated depreciation-building

7,500

Equipment

500,000

Accumulated depreciation-equipment

Accounts payable

105,000

Note payable

125,000

Salaries payable

Interest payable

Note payable (due in 5 years, 3%)

Common Stock (3,000 shares outstanding)

300,000

Retained earnings

171,000

Sales revenue

850,000

Cost of goods sold

550,000

Salaries expense

Insurance expense

Depreciation expense

Interest expense

Bad debt expense

Totals

2,123,500

Trial Balnce – Prior Year

Smith Manufacturing, Inc.

December 31, 20XX
DR CR

Cash

Accounts receivable

Allowance for uncollectible accounts

Prepaid insurance 5,000
Inventory

Land 50,000
Building 150,000
Accumulated depreciation-building 7,500
Equipment 500,000
Accumulated depreciation-equipment 50,000

Accounts payable

Note payable 50,000
Salaries payable 5,000
Interest payable

Note payable (due in 5 years, 3%)

Common Stock (3,000 shares outstanding) 300,000
Retained earnings 171,000

Sales revenue
Cost of goods sold
Salaries expense

Insurance expense
Depreciation expense
Interest expense
Bad debt expense

Totals

1,025,750

Post-Closing Trial Balance
15,000
	225,750
20,000
	80,000
55,000
	17,250
		350,000
	1,025,750

STATEMENT CASH FLOW

Smith Manufacturing, Inc.

Inventory

50,000

Salaries payable (3,000)

0

150,000

15,000

Statement of Cash Flows
	For Year Ending Dec 31, 20XX
Cash Flow from Operating Activities:
	Net Income		$ 68,750
Non Cash Expenses (+)
Depreciation Expense	$	57,500
Interest expense		21,250	78,750
Net profit before working capital changes	147,500
(Increase)/ Decrease in Current	Assets
	40,000
Accounts Receivable	(91,500)
	Prepaid Insurance		(3,000)
(54,500)
Increase/(decrease) in	Current Liabilities:
Accounts Payable
Short term notes payable	75,000
12		2,000
Net Cash Flow from Operating Activities- A	215,000
Cash Flow from Investing Activities-B
Cash Flow from Financing Activities:
Long term Notes payable
Interest paid	(17,250)
Net Cash Flow from Financing Activities- C	132,750
Net Increase in Cash	347,750
Add Opening Balance of Cash
Closing Balance of cash		$ 362,750

INCOME STATEMENT

Smith Manufacturing, Inc.

For Year Ending Dec 31, 20XX

2,000

57,500

Net Income $ 68,750

Multiple-step Income Statement
Sales Revenue	$ 850,000
Less: Cost of Goods Sold	(540,000)
Gross profit	310,000
Less Expenses:
Salaries expense	$ 152,000
Insurance expense
Depreciation expense
Bad Debts expense	8,500
Total expenses	220,000
Income before interest	90,000
Less: Interest expense	(21,250)

BALANCE SHEET

Smith Manufacturing, Inc.

Assets

Cash

$ 362,750

Accounts receivable 225,750 320,750
Prepaid Insurance 5,000

Inventory 80,000 40,000
Land

$ 50,000

Building 150,000 150,000
Equipment 500,000 500,000
Current Liabilities:
Accounts payable

50,000 125,000

5,000 2,000

17,250 21,250

350,000 500,000

350,000 500,000

300,000 300,000

171,000

$ 948,250 $ 1,293,000

Balance Sheet
As at Dec 31, 20XX
Prior YR	Current YR
Current Assets:
$ 15,000
Less Allowance for doubtful Debts	(20,000)	(23,500)
Net Accounts Receivable	205,750	297,250
8,000
Total Current Assets	$ 305,750	$ 708,000
Fixed Assets:
	$ 50,000
Less Accumulated Depreciation on Building	(7,500)	(15,000)
Net Building	142,500	135,000
Less Accumulated Depreciation on Equipment	(50,000)	(100,000)
Net Equipment	450,000	400,000
Total Fixed Assets	642,500	585,000
Total Assets		$ 948,250		$ 1,293,000
$ 55,000	$ 105,000
Notes Payable (Short term )
Salaries Payable
Interest Payable
Total Current Liabilities	127,250	253,250
Long Term Liabilities:
Notes Payable (long term )
Total Long term Liabilities
Common stock
Retained Earnings	239,750
Total Equity	471,000	539,750
Total Liabilities and Equity