Horizontal Analysis of Comparative Statements

XYZ, Inc.

Comparative Statement of Financial Position

December 31, 2019 and 2018

2019 2018

Assets

Current Assets

Cash 70,392 68,250

Accounts receivable (net) 218,549 184,978

Inventory 223,242 197,097

Prepaid expenses 67,710 76,542

Total current assets 579,893 526,867

Noncurrent Assets

Plant, Property and Equipment (net) 90,503 110,987

Total Assets 670,396 637,854

Liabilities and Equity

Current Liabilities

Accounts payable 158,214 139,135

Bank loans and other payables 71,672 56,769

Current portion of notes payable 30,000 30,000

Total current liabilities 259,886 225,904

Long-term liabilities

Notes payable (11%) 139,000 169,000

Total liabilities 398,886 394,904

Equity

Preference shares, P8 dividend, P100 par 70,000 70,000

Ordinary shares, P1 par value 10,000 10,000

Additional paid-in capital 90,000 90,000

Total paid-in capital 170,000 170,000

Retained earnings 101,510 72,950

Total equity 271,510 242,950

Total liabilities and equity 670,396 637,854

xyz, Inc.

Comparative Income Statement

For the Years Ended December 31, 2019 and 2018

2019 2018

Sales revenue 2,000,000 1,801,802

Expenses

Cost of goods sold 1,472,000 1,309,910

Selling 248,000 230,000

Administrative 138,000 142,000

Total expenses 1,858,000 1,681,910

Operating income 142,000 119,892

Interest expense 27,907 29,270

Income before taxes 114,093 90,622

Income taxes (35%) 39933 31718

Net income 74,160 58,904

Dividends to preference shareholders 5,600 5,600

Net income remaining for ordinary shareholders 68,560 53,304

Dividends to ordinary shareholders 40,000 32,000

Net income added to retained earnings 28,560 21,304

Retained earnings, beg. of year 72,950 51,646

Retained earnings, end of year 101,510 72,950

Requirements:

a. Prepare horizontal analysis based on the above statements presented (for percent: round of into 2 decimal places)

b. Evaluate the company's financial position and results of operation using the comparative statement analysis

i. Short-term solvency analysis

ii. Long-term financial position analysis

iii. Operating efficiency and profitability analysis