Question $1$

Complete a horizonal analysis of the income statement and balance sheet.

Trustworthy Company Trustworthy Company

Income Statement Balance Sheet

$20172016$ $ change $\%$ change $20172016$ $ change $\%$ change

Revenue $$350,000$ $$300,000$ Cash $$8,000$ $$23,000$

COGS $$125,000$ $$100,000$ Accounts receivable $$7,000$ $$2,000$

Gross profit $$225,000$ $$200,000$ Inventory $$15,000$ $$5,000$

Less xpenses Computers $$15,000$ $$14,000$

Salaries $$120,000$ $$115,000$ Acc. depreciation $-$ computers $-$$$3,500-$$$2,200$

Advertising $$10,000$ $$11,250$ Vehicles $$85,000$ $$85,000$

Supplies $$3,000$ $$2,400$ Acc. depreciation $-$ vehicles $-$$$20,000-$$$17,000$

Interest $$4,200$ $$4,500$ Total assets $$106,500$ $$109,800$

Depreciation $$4,300$ $$4,000$ Accounts payable $$16,000$ $$18,000$

Long$-$term $-$ bank loan $$63,000$ $$66,000$

Total expenses $$141,500$ $$137,150$ Total liabilities $$79,000$ $$84,000$

Operating income before tax $$83,500$ $$62,850$ Share capital $$18,000$ $$18,000$

Tax $$18,370$ $$12,570$ Retained earnings $$9,500$ $$7,800$

Net ncome $($loss$)$ $$65,130$ $$50,280$ Shareholders' equity $$27,500$ $$25,800$

Liabilities $+$ shareholders' equity $$106,500$ $$109,800$

Complete a vertical analysis of both above documents for $2017$ only, and the ratios.

Trustworthy Company Trustworthy Company

Income Statement Balance Sheet $2017$

$20172017$ Current ratio :$1$

Revenue Cash $800000\%$ Quick ratio :$1$

COGS Accounts receivable DSO days

Gross profit Inventory Accounts receivable turnover times a year

Less expenses Computers Inventory days on hand days

Salaries Acc. depreciation $-$ computers Inventory turnover times a year

Advertising Vehicles

Supplies Acc. depreciation $-$ vehicles Gross margin

Interest Total assets Net income margin

Depreciation Accounts payable Return on assets

Long$-$term $-$ bank loan Return on equity

Total expenses Total liabilities Debt to equity ratio

Operating income before tax Share capital

Tax Retained earnings

Net income $($loss$)$ Shareholders' equity

Liabilities $+$ shareholders' equity