The income statement and balance sheet are the primary reports that a firm constructs for use by management and for distribution to stockholders, regulatory bodies, and the general public. They are the primary sources of historical financial information about the firm. Dayton Products Inc. is a moderate-sized manufacturer. The company’s management has asked you to perform a detailed financial statement analysis of the firm.

The income statements for the years ending December 31, 2022 and 2021, respectively, are presented in the following table.

You also have the following balance sheet information as of December 31, 2022 and 2021.

TO DO

a. Create a spreadsheet similar to Table 3.1 to model the following:

(1) A multiple-step comparative income statement for Dayton Inc. for the periods ending December 31, 2022 and 2021. You must calculate the cost of goods sold for the year 2022.

(2) A common-size income statement for Dayton Inc. covering the years 2022 and 2021.

b. Create a spreadsheet similar to Table 3.2 to model the following:

(1) A detailed, comparative balance sheet for Dayton Inc. for 2022 and 2021.

(2) A common-size balance sheet for Dayton Inc. covering the years 2022 and 2021.

c. Create a spreadsheet similar to Table 3.5 to perform the following analysis:

(1) Create a table that reflects both 2022 and 2021 operating ratios for Dayton Inc., segmented into

(a) liquidity,

(b) activity,

(c) debt,

(d) profitability,

(e) market. 

Assume that the current market price for the stock is $90.

(2) Compare the 2022 ratios to the 2021 ratios. Indicate whether the results “outperformed the prior year” or “underperformed relative to the prior year.”

Tables

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Sales Annual Income Statements (Values in $ thousands) For the year ended December 31, 2021 $187,510 December 31, 2022 $178,909 Cost of goods sold 109,701 111,631 Selling, general, and administrative expenses 12,356 12,900 Other tax expense 33,572 33,377 Depreciation and amortization 12,103 7,944 Other income (add to EBIT to arrive at EBT) 3,147 3,323 Interest expense 398 293 Income tax rate Dividends paid per share Basic EPS from total operations 21% 21% $1.15 $0.91 $1.64 $2.87