COMMON SIZE STATEMENTS FOR VERTICAL ANALYSIS The following comparative percentage income statements and balance sheets are available for Charger Products:

Charger Products Statements of Income Year Ended December 31, 2009 2008 2007 Amount % Amount % Amount %

Revenues $901,170 100.0 $728,035 100.0 $661,850 100.0 Costs and expenses:

Cost of good sold $539,801 59.9 $439,005 60.3 $401,743 60.7 Selling and administrative 318,113 35.3 206,034 28.3 176,052 26.6 Interest 17,122 1.9 18,201 2.5 17,208 2.6 Other expenses

(income) 9,913 1.1 2,912 0.4 (1,324) (0.2)

Total costs and expenses $884,949 98.2 $666,152 91.5 $593,679 89.7 Income before provision for income taxes 16,221 1.8 61,883 8.5 68,171 10.3 Provision for income taxes 4,506 0.5 22,569 3.1 23,827 3.6 Net income $ 11,715 1.3 $ 39,314 5.4 $ 44,344 6.7 Charger Products Comparative Balance Sheets December 31, ASSETS 2009 2008 2007 Amount % Amount % Amount %

Current assets $147,129 31.4 $ 62,417 14.3 $ 66,927 16.1 Investment 30,925 6.6 95,589 21.9 91,453 22.0 Property, plant, and equipment (net) 270,831 57.8 261,015 59.8 241,519 58.1 Other assets 19,680 4.2 17,459 4.0 15,796 3.8 Total assets $468,565 100.0 $436,480 100.0 $415,695 100.0 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities $ 68,410 14.6 $ 29,244 6.7 $ 28,683 6.9 Long-term debt 152,284 32.5 162,807 37.3 152,976 36.8 Total liabilities $220,694 47.1 $192,051 44.0 $181,659 43.7 Common stock $183,209 39.1 $182,332 41.8 $171,266 41.2 Retained earnings 64,662 13.8 62,097 14.2 62,770 15.1 Total stockholders’

equity $247,871 52.9 $244,429 56.0 $234,036 56.3 Total liabilities and stockholders’

equity $468,565 100.0 $436,480 100.0 $415,695 100.0 Required:

. Explain why income from operations decreased in 2008 and 2009 while sales increased.

. Determine whether the proportion of resources invested in the various asset categories changed.

. Determine whether the proportion of capital supplied by creditors changed.

. Indicate from what sources Charger secured the capital to finance its increase in current assets in 2009.

Exercise