1. You receive the following partial balance sheet (Table 45) for 2013 and 2012 for a company that you are considering making an investment in. Perform a vertical analysis for each year on these accounts. Compare the two years, and describe those changes that were beneficial or detrimental to this company in one sentence.

Table 45 Balance Sheet, Sample Company

Category	2012	Vertical Analysis 2012	2013	Vertical Analysis 2013
Current assets	$ 7,000,000	______________	$ 9,000,000	______________
Total fixed assets	8,000,000	______________	6,000,000	______________
Total assets	15,000,000	______________	15,000,000	______________
Current liabilities	$ 3,000,000	______________	$ 1,000,000	______________
Long term debt	4,000,000	______________	4,000,000	______________
Owners equity	8,000,000	______________	10,000,000	______________
Total liabilities & owners equity	$15,000,000	______________	$15,000,000	______________

2. Construct a personal income statement for the Humperdinck family using the following information: salaries, $42,000; mortgage payment, $7,980; food, $2,400; interest income, $150; transportation, $1,200; dividend income, $190; automobile payment, $3,060; clothes and personal, $2,000; student loan payment, $1,700; property taxes, $1,100; utilities, $3,000; insurance, $2,100; income taxes, $9,700; and recreation and vacation, $2,000. What is the familys disposable income?

3. Construct a statement of financial position (balance sheet) for the Humperdinck family using the following information: cash, $50; checking account, $2,500; student loan balance, $6,000; stocks and bonds, $2,600; savings account, $5,850; residence, $110,000; automobile, $12,000; savings account, $5,800; automobile loan balance, $12,000; 401(k) retirement account, $15,000; furniture, clothing, jewelry, $8,000; credit card balance, $4,000; and mortgage loan balance, $99,000.

4. Construct an income statement using the following information: net sales, $500,000; salaries, $100,000; rent, $24,000; COGS, $250,000; utilities, $25,000; payroll taxes, $25,000; insurance, $12,000; and interest expense, $5,450. Make sure that you include gross profit, operating expenses, and net profit. 5. You were not totally satisfied with the vertical analysis, so you now want to run a horizontal analysis of this company. Complete Table 46. Perform a horizontal analysis on these accounts. Compare the changes in accounts, and describe the changes that were beneficial or detrimental to this company in one sentence.

Table 46 Sample Balance Sheet

	2012	2013	Horizontal Analysis
Current assets	$ 7,000,000	$ 9,000,000	____________________
Total fixed assets	8,000,000	6,000,000	____________________
Total assets	15,000,000	15,000,000	____________________
Current liabilities	$ 3,000,000	$ 1,000,000	____________________
Long-term debt	4,000,000	4,000,000	____________________
Owners equity	8,000,000	10,000,000	____________________
Total liabilities & owners equity	$15,000,000	$15,000,000	____________________

6. Given the balance sheet for the Moderately Large Corporation (Table 44), answer the following:

a. For each year, calculate the following ratios: current, quick, debt-to-asset, and debt-to-equity.

b. In a written explanation, state what each ratio means.

c. Compare the ratios for the 2-year period and determine if the MLC is sufficiently liquid.

d. How well is the MLC managing its debt?

Table 44 Moderately Large Corporation Consolidated Balance Sheet

Moderately Large Corporation Consolidaed Balance Sheet (in thousands except share data)
Fiscal Year Ended			Dec. 31, 2013	Dec. 31, 2012
ASSETS
Current assets:
	Cash and cash equivalents		$1,369	$1,427
	Accounts receivable, net		1,008	876
	Inventories		1,489	481
	Prepaid expenses and other current assets		157	126
	Deferred income taxes, net		44	40
		Total current assets	4,066	2,950
Property, plant and equipment, net			3,137	2,287
Other assets			168	161
	TOTAL ASSETS		$7,371	$5,398
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
	Accounts payable		$429	$242
	Accrued compensation and related costs		104	98
	Accrued taxes		132	141
	Current portion of long-term debt		89	82
		Total current liabilities	754	563
Long-term debt			2,630	1,830
		Total liabilities	3,384	2,392
Shareholders equity:
	Common stock ($0.1 par value)authorized, 4,000,000 shares; issued and outstanding, 3,500,000.		350	350
	Paid-in capital in excess of par		2,415	2,415
	Retained earnings		1,222	241
		Total shareholders equity	3,987	3,006
	TOTAL LIABILITIES AND SHAREHOLDERS EQUITY		$7,371	$5,398