In these exercises you will be applying Vertical Analysis and Horizontal Analysis to the Income Statements and Balance Sheets of The Toro Company. Use the form in the Excel file Red Company Chapter 2 Homework Form to record your answers. For the exercises below and for the homework exercises at the end of all remaining chapters, you will be using the financial statements of The Toro Company. To view Toro's financial statements: - Open the file Toro Financial Statements.pdf The four pages in this file contain the following financial statements for Toro: Consolidated Statements of Earnings (Income Statements) Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Stockholders' Equity As indicated above, you will be using Toro's four financial statements for all remaining end-of- chapter homework exercises; thus printing the four financial statements will make your analysis work much easier. Note: The dollar amounts on Toro's financial statements are shown in thousands of dollars. For example, Toro's Net Sales for 2017 were $2,505,176,000 but are shown on Toro's Income Statement as $2,505,176. Exercise questions that ask for dollar amounts, will always ask for the answer to be in thousands of dollars. Thus you can use the amounts just as the amounts are shown on Toro's financial statements. If you were asked, What was Toro's Net Sales for 2017 in thousands of dollars?-your answer would be $2,505,176 as shown on Toro's Income Statement. Toro's accounting year is a fiscal year. The term fiscal year is used when the accounting year ends on a date other than December 31. Toro's fiscal year ends on October 31. Exercise 2-1 - Vertical Analysis of Toro's Income Statement A. For the following five Income Statement line items, calculate the percentages that would be shown in the % of Net Sales column when Vertical Analysis is applied to Toro's 2017 and 2016 Income Statements. (Toro's Income Statements are named Consolidated Statements of Earnings). Round your percent answers to 2 decimal places. See the appendix on Pg 86 in the file 6 - Annual Report Project and Rounding Rules.pdf for rounding examples and directions. 1. Cost of sales 2. Gross profit 3. Selling, general, and administrative expense 4. Operating earnings 5. Net earnings B. Based on your answers to A. above, discuss which line item (Cost of sales or Selling, general and administrative expense) helped to increase Operating earnings and Net earnings as a % of Net sales from 2016 to 2017. Chapter 2 - Vertical & Horizontal Analysis RED COMPANY 19 Exercise 2-2 - Vertical Analysis of Toro's Balance Sheet A or the followinflambat lite twould ha Exercise 2-2 - Vertical Analysis of Toro's Balance Sheet A. For the following five Balance Sheet line items, calculate the percentages that would be shown in the % of Total column when Vertical Analysis is applied to Toro's 2017 and 2016 Balance Sheets. Round your percent answers to 2 decimal places. 1. Total receivables, net 2. Inventories, net 3. Accounts payable 4. Retained earnings 5. Total stockholders' equity B. Based on your answer to A.5. above, did liabilities or equity finance more of Toro's Total Assets in 2017? Exercise 2-3 - Horizontal Analysis of Toro's Income Statement A. For the following four Income Statement line items, calculate the Percent Change from 2016 to 2017 and from 2015 to 2016. Round your percent answers to 2 decimal places. 1. Net sales 2. Cost of sales 3. Gross profit 4. Selling, general, and administrative expenses 5. Net earnings B. Based on your answers to A. above, discuss the Percent Change in Gross profit from 2016 to 2017 compared to the Percent Change in Net sales from 2016 to 2017. Exercise 2-4 - Horizontal Analysis of Toro's Balance Sheet A. For the following four Balance Sheet line items, calculate the Dollar Change and the Percent Change from 2016 to 2017. Show your Dollar Change answers in thousands of dollars (see the Note on the previous page). Round your percent answers to 2 decimal places. 1. Total receivables, net 2. Inventories, net 3. Accounts payable 4. Retained earnings B. Based on your answer to A.2. above and your answer to A.2. in Exercise 2-3, discuss the Percent Change in Inventory from 2016 to 2017 compared to the Percent Change in Cost of sales from 2016 to 2017. In these exercises you will be applying Vertical Analysis and Horizontal Analysis to the Income Statements and Balance Sheets of The Toro Company. Use the form in the Excel file Red Company Chapter 2 Homework Form to record your answers. For the exercises below and for the homework exercises at the end of all remaining chapters, you will be using the financial statements of The Toro Company. To view Toro's financial statements: - Open the file Toro Financial Statements.pdf The four pages in this file contain the following financial statements for Toro: Consolidated Statements of Earnings (Income Statements) Consolidated Balance Sheets Consolidated Statements of Cash Flows Consolidated Statements of Stockholders' Equity As indicated above, you will be using Toro's four financial statements for all remaining end-of- chapter homework exercises; thus printing the four financial statements will make your analysis work much easier. Note: The dollar amounts on Toro's financial statements are shown in thousands of dollars. For example, Toro's Net Sales for 2017 were $2,505,176,000 but are shown on Toro's Income Statement as $2,505,176. Exercise questions that ask for dollar amounts, will always ask for the answer to be in thousands of dollars. Thus you can use the amounts just as the amounts are shown on Toro's financial statements. If you were asked, What was Toro's Net Sales for 2017 in thousands of dollars?-your answer would be $2,505,176 as shown on Toro's Income Statement. Toro's accounting year is a fiscal year. The term fiscal year is used when the accounting year ends on a date other than December 31. Toro's fiscal year ends on October 31. Exercise 2-1 - Vertical Analysis of Toro's Income Statement A. For the following five Income Statement line items, calculate the percentages that would be shown in the % of Net Sales column when Vertical Analysis is applied to Toro's 2017 and 2016 Income Statements. (Toro's Income Statements are named Consolidated Statements of Earnings). Round your percent answers to 2 decimal places. See the appendix on Pg 86 in the file 6 - Annual Report Project and Rounding Rules.pdf for rounding examples and directions. 1. Cost of sales 2. Gross profit 3. Selling, general, and administrative expense 4. Operating earnings 5. Net earnings B. Based on your answers to A. above, discuss which line item (Cost of sales or Selling, general and administrative expense) helped to increase Operating earnings and Net earnings as a % of Net sales from 2016 to 2017. Chapter 2 - Vertical & Horizontal Analysis RED COMPANY 19 Exercise 2-2 - Vertical Analysis of Toro's Balance Sheet A or the followinflambat lite twould ha Exercise 2-2 - Vertical Analysis of Toro's Balance Sheet A. For the following five Balance Sheet line items, calculate the percentages that would be shown in the % of Total column when Vertical Analysis is applied to Toro's 2017 and 2016 Balance Sheets. Round your percent answers to 2 decimal places. 1. Total receivables, net 2. Inventories, net 3. Accounts payable 4. Retained earnings 5. Total stockholders' equity B. Based on your answer to A.5. above, did liabilities or equity finance more of Toro's Total Assets in 2017? Exercise 2-3 - Horizontal Analysis of Toro's Income Statement A. For the following four Income Statement line items, calculate the Percent Change from 2016 to 2017 and from 2015 to 2016. Round your percent answers to 2 decimal places. 1. Net sales 2. Cost of sales 3. Gross profit 4. Selling, general, and administrative expenses 5. Net earnings B. Based on your answers to A. above, discuss the Percent Change in Gross profit from 2016 to 2017 compared to the Percent Change in Net sales from 2016 to 2017. Exercise 2-4 - Horizontal Analysis of Toro's Balance Sheet A. For the following four Balance Sheet line items, calculate the Dollar Change and the Percent Change from 2016 to 2017. Show your Dollar Change answers in thousands of dollars (see the Note on the previous page). Round your percent answers to 2 decimal places. 1. Total receivables, net 2. Inventories, net 3. Accounts payable 4. Retained earnings B. Based on your answer to A.2. above and your answer to A.2. in Exercise 2-3, discuss the Percent Change in Inventory from 2016 to 2017 compared to the Percent Change in Cost of sales from 2016 to 2017