Problem 18 8A Natural Microwave Products Led's financial statements for the year ended December 31, Preparing a horizontal and verti- 2017, are shown below: cal analysis of afrandale ment, computing the standard finance rates used for dedsion NATURAL MICROWAVE PRODUCTS LTD. making using is in decision malding Income Statement For the Year Ended December 31, 2017 02 3.3.8.64 Net sales $945,000 Cost of goods sold 610.000 Gross margin 335.000 Operating expenses 128,200 Selling expenses Administrative expenses 78,000 22,000 Interest expense Total operating expenses 228,200 Operating income 106,100 26,700 Income taxes (25%) 80,100 Net income NATURAL MICROWAVE PRODUCTS LTD. Statement of Retained Earnings For the Near Ended December 31, 2017 Retained earnings, January 1, 2017 Add net income for 2017 5162,000 80,100 242.100 $25,000 9.000 Les dividends: Preferred Common Retined carins. December 31, 2017 34.000 $209,109 2016 $ 45,000 92.000 118.000 6,000 474.000 70,000) 40.000 $205,000 NATURAL MICROWAVE PRODUCTS LTD. Balance Sheet December 31, 2017 and 2016 2017 Assets Cash $90,000 Accounts receivable 54.000 Merchandise Inventory 102.000 Prepaid expenses 8.000 Property, plant, and equipment 498.000 Accumulated amortization (106.000 Goodwill 40,000 Totala 9713 000 Liabilities Accounts payable $ 30,100 Notes payable due in 30 days) 3.000 Mortgage payable 68.800 Total liabili 101,900 Shareholders' equity Preferred share (1,250 shares $20.00 calable at S210.00 per share) $240,000 Common shares (2017-12,000 shares:2016.000 shares) 168,000 Retained carings 208,100 Total shareholders' equity Total liabilities and shareholders' equity 616,100 $218.000 $ 43,000 10,000 130,000 183.000 $200,000 120,000 162.000 $22.000 $70,000 Required 1. Perform a horiental analysis of the comparative balance sheets. Comment on the analysis 2 Perform a vertical analysis of the income statement. The industry standards are gross margin of 35 percent and net Income od 12 percent Comment on the results 3. Calcule ench of the following rates for the year ended December 31, 2017. The Indus try standards are provided in parentheses for some of the ratios. Current ratio (1) h. Rate of retum on total at b. Acid-best ratio i Rate of retum on common shareholders c. Inventory turnover equity d. Days' sales in receivables 1 Pricemings ratio--the market price Dobratio (0:30) per shares000 a year end, when div. f. Times-interest-earned ratio denda were paid (5.0) Rated retum en net sales k Dividend yeld (3%)