Question

Balance Sheet	2016	2015	2014
Cash	50,000	45000	40,000
Accounts receivable	80,000	70000	60,000
Inventories	180,000	145000	110,000
Plant & equipment	300,000	280000	260,000
Less accumulated depreciation	-40,000	-30000	-20,000
Total assets	570,000	510000	450,000
Accounts payable	100,000	125000	150,000
Accrued liabilities	70,000	60000	50,000
Mortgage payable	80,000	40000	60,000
Common stock	130,000	110000	90,000
Retained earnings	190,000	175000	160,000
Total liabilities and equity	570,000	510000	450,000

Income Statement	2014	2015	2016
Net Sales	680,000	600,000	640000
Cost of goods sold	410,000	330,000	370000
Gross profit	270,000	270,000	270000
Operating expenses	190,000	192,000	191000
Operating income	80,000	78,000	79000
Interest expense	7,000	2,000	4500
Profit before taxes	73,000	76,000	74500
Taxes	22,000	22,800	22400
Net income	51,000	53,200	52100

Other data:

• Cash dividends paid this year were $21,000.
• The change in accumulated depreciation account is the depreciation for the year.

Required:

1. Using the balance sheets and income statement, prepare a Horizontal common-size analysis for both years.
2. Comment on significant trends.

Answer 1

The answer has been presented in the supporting sheet.