17-M Mastery Problem: Analyzing financial statements L01, 2, 3, 4, 5, 6, 7, 8 The income statement and balance sheet for Aqua Products, Inc., and forms for completing this problem are given in the Working Papers. Instructions: X 1. Review the comparative financial statements 2. Complete the vertical analysis. 3. Complete the horizontal analysis 4. Print the worksheets. 1. Prepare a vertical analysis of the income statement and balance sheet. Round percentage calculations to the nearest 0.1%. 2. Prepare a horizontal analysis of the comparative income statement and balance sheet Round percentage calculations to the nearest 0.1%. 3. Compare the actual vertical analysis ratios to management's benchmark ratios. Identify whether each ratio is within management's target range. 4. Using the following information, calculate the following ratios for the current year. (al earnings per share. (b) dividend yield, and (c) price-earnings ratis. Round the dividend yield to the nearest 0.01%. Round the price-earnings ratio to the nearest 0.1. Evaluate each ratio relative to prior-year ratios. Number of shares outstanding 10,000 Dividends per share $0.80 Market price $92.40 5. Calculate the (a) working capital and (b) current and quick ratios. Round ratios to the nearest 0.01, Determine if these ratios are within management's target range. Dale Class Name 17-M MASTERY PROBLEM (L01, 2, 3, 4, 5, 6, 7, 8), p. 542 Analyzing financial statements 1. Aqua Products, Inc Comparative Income Statement For Years Ended December 31, 20 and 20- Current Year Amount Percent 838 9:4116 39149171 47 449 45 Prior Year Amount Percent 774 82 766 3666018174 408 218192 246000 10/4/9/118 204 18:58 Net Sales Cost of Merchandise Sold Gross Profit Operating Expenses Depreciation Expense Office Expense Salaries and Payroll Tax Expense Store Expense Total Operating Expenses Income from Operations Other Revenue Net Income before Federal Income Tax Less Federal Income The Expense Net Income after Federal Income Tax 16918 4.15 408 459191 38 989 54 64/200 225 60 00 92142/49 1929 1943 170 1 9 4155 395 41 647 1280245 2/2 800 130 30 45 1954.57 110 75188 3963 1154 594473 33 686 81 17-M MASTERY PROBLEM (continued) Aqua Products, Inc. Comparative Balance Sheet December 31, 20- and 20- E Current Year Prior Year Amount Percent Amount Percent ASSETS Current Assets Cash Accounts Receivable (net) Merchandise Inventory Other Current Assets Total Current Assets Plant Assets: Office Equipment (net) Store Equipment (net) Total Plant Assets Total Assets 2390/5/98 18/1/4/2/15 98 1/4 2 36 91/41825 14933 8.74 8029 57 17 91 563 82 19438 81 43 37 116 2.8 2.95 3298904 35 1 8 4147 68 1 7 3.51 217 51 225 38 195.52 4091983 79 D1035 195 39330 om LIABILITIES Current Liabilities Accounts Payable Dividends Payable Othe-Current Liabilities Total Liabilities STOCKHOLDERS' EQUITY Capital Stock Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 1418910 2 000,00 9/4/81176 256 70 86 26 4191 1 800 109.47 61 39 23 872 Lang om 100 000.00 91 84139 1918 4139 90 000.00 661 5058 156 1558 195 39 3.30 217 5 1/2 25 Date Clos Name 17-M MASTERY PROBLEM (continued) 2. Aqua Products, Inc. Comparative Income Statement For Years Ended December 31, 20-- and 20 8 Increase (Decreases Amount Percent Current Prior Year Year 83894 h6 77482766 391 0917366 60874 447 449 45 408 218192 Net Sales Cost of Merchandise Sold Gross Profit Operating Expenses Depreciation Expense Office Expense Salaries and Payroll Taxes Expense Store Expense Total Operating Expenses Income from Operations Other Revenue Net Income before Federal Income Tax Less Federal Income Tax Expense Net Income after Federal Income Tax 2460 225 60.00 101419 11 9742449 204184158 1929 19:43 16918 415 170 19 4.55 408 4/5 991 395 41 6/47 389819151 12 802.15 642.00 2/2 5.00 3963154 13 031045 594473 195457 3368681 110 2588 TI scto oth SED Chapter 17 Financial Statement Analysis. 519 17-M MASTERY PROBLEM (continued) Aqua Products, Inc. Comparative Balance Sheet December 31, 20 and 20- Current Year Prior Year Increase (Decrease) Amount Percent 2390 598 8029,57 18 1/4 2 15 17/9/1/563 981 42 36 82119438 914825 8114 337 1493 3.8 74 116 218 2195 ASSETS Current Assets Cash Accounts Receivable (net) Merchandise Inventory Other Current Assets Total Current Assets Plant Assets: Office Equipment (net) Store Equipment (net) Total Plant Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Dividends Payable Other Current Liabilities Total Liabilities STOCKHOLDERS' EQUITY Capital Stock Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity 3298 904 38 1/95.52 35 18 47 40 91 483 68173.51 79 11 035 217 51 225 195 39 3 30 111 89 10 2699111 200 000 1 80000 949 176 10 9 4 761 256 7086392 38.72 100 0000 90 000.00 91 8 4 139 661 5 458 1918/4159 156 15458 217 51 225 195 3 9330 520 . Working Papers ands Class Dole Nome LO 17-M MASTERY PROBLEM (concluded) IR's Quil opers Favorable Trend Within Target Range Actual Ratio Current Year Prior Year mpat Ratio os to TR favorat Gross margin Total operating expenses Operating margin Merchandise inventory Total plant assets Total liabilities Acceptable Range Low High 510% 54,0% 46,00 48.0% 5.0% 8.0% 40.0% 42.09 30.0% 35.0% 12.0% 15.0% M Evaluation para Current Prior Year Increase over Prior Year (Yes or No) to le $123 tren Pamings per share Dividend yield 0.82% sir Vec to 266 Price-amings ritio wala 5. Acceptable Range Actual Ratio Within Target Range Low High Working capital $125,000.00 $145,000.00 Current ratio 4.50 5.00 Quick ratio 1.00 2.00 Chapter 17 Financial Statement Analysis. 521