ED-15 Performing horizontal analysisincome statement Data for Mariner Designs, Inc. follow: MARINER DESIGNS, INC. Comparative Income Statement Years Ended December 31, 2015 and 2014 Net Sales Revenue $ 431,000 $ 372,350 Expenses: Cost of Goods Sold 200,000 187,550 Selling and Administrative Expenses 99,000 91,050 Other Expenses 8,350 6,850 Total Expenses 307,350 285,450 Net Income $ 123,650 $ 86,900 Requirements 1. Prepare a horizontal analysis of the comparative income statement of Mariner Designs Inc. Round percentage changes to the one decimal place/ 2. Why did 2015 net income increase by a higher percentage than net sales revenue? ED-20 Computing key ratios The financial statements of Victors Natural Foods included the following: Current Year Preceding Year Balance Sheet: Cash $ 15,000 $ 20,000 Short-term Investments 11,000 27,000 Net Accounts Receivables 54,000 73,000 Merchandise Inventory 77,000 69,000 Prepaid Expenses 15,000 9,000 Total Current Assets 172,000 198,000 Total Current Liabilities 133,000 93,000 Income Statement: Net Credit Sales $ 462,000 Cost of Goods Sold 315,000 Compute the following ratios for the current year: a. Current ratio b. Cash ratio c. Acid-test ratio d. Inventory turnover e. Days sales in inventory f. Days sales in receivables g. Gross profit percentage ED-21 Analyzing the ability to pay liabilities Large Land Photo Shop has asked you to determine whether the companys ability to pay current liabilities and total liabilities improved or deteriorated during 2015. To answer this question, you gather the following data: 2015 2014 Cash $ 58,000 $ 57,000 Short-term Investments 31,000 0 Net Accounts Receivables 110,000 132,000 Merchandise Inventory 247,000 297,000 Total Assets 585,000 535,000 Total Current Liabilities 255,000 222,000 Long-term Note Payable 46,000 48,000 Income From Operations 180,000 153,000 Interest Expense 52,000 39,000 Compute the following ratios for 2015 and 2014, and evaluate the companys ability to pay its current liabilities and total liabilities: a. Current ratio b. Cash ratio c. Acid-test ratio d. Debt ratio e. Debt to equity ratio Comprehensive Problem for Appendix D Analyzing a company for its investment potential In its annual report, WRS Athletic Supply Inc included the following five-year financial summary. WRS ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted) (Dollar amounts in thousands except per share data) 2018 2017 2016 2015 2014 2013 Net Sales $244,524 $217,799 $191,329 $165,013 $137,634 Net Sales Increase 12% 14% 16% 20% 17% Domestic Comparative Store Sales Increase 5% 6% 5% 8% 9% Other IncomeNet 2,001 1,873 1,787 1,615 1,391 Cost of Goods Sold 191,838 171,562 150,255 129,664 108,725 Operating, Selling, and General and Administrative Expenses 41,236 36,356 31,679 27,408 22,516 Interest: Interest Expense (1,063) (1,357) (1,383) (1,045) (803) Interest Income 138 171 188 204 189 Income Tax Expense 4,487 3,897 3,692 3,338 2,740 Net Income 8,039 6,671 6,295 5,377 4,430 Per Share of Common Stock: Net Income 1.81 1.49 1.41 1.21 0.99 Dividends 0.30 0.28 0.24 0.20 0.16 Financial Position Current Assets, Excluding Merchandise Inventory $ 30,483 $ 27,878 $ 26,555 $ 24,356 $ 21,132 Merchandise Inventory at LIFO Cost 24,891 22,614 21,442 19,793 17,076 $16,497 Property, Plant, and Equipment, Net 51,904 45,750 40,934 35,969 25,973 Total Assets 94,685 83,527 78,130 70,349 49,996 Current Liabilities 32,617 27,282 28,949 25,803 16,762 Long-term Debt 22,731 21,143 17,838 18,712 12,122 Shareholders Equity 39,337 35,102 31,343 25,834 21,112 Financial Ratios Acid-test Ratio 0.9 1.0 0.9 0.9 1.3 Rate of Return on Total Assets 10.2% 9.9% 10.3% 10.7% 9.6% Rate of Return on Shareholders Equity 21.6% 20.1% 22.0% 22.9% 22.4% Requirements 1. Analyze the companys financial summary for the fiscal years 20142018 to Decide whether to invest in the common stock of WRS. Include the following sections in your analysis, and fully explain your final decision. 1. Trend analysis for net sales and net income (use 2014 as the base year). 2. Profitability analysis. 3. Evaluation of the ability to sell merchandise inventory ( WRS uses the LIFO method) method). 4. Evaluation of the ability to pay debts. 5. Evaluation of dividends