Your company has been in business for some time now, steadily building its revenue streams and implementing strategies for growth. Having gone public, you know the importance investors, creditors, and analysts place on various financial ratios and trends. You want to continue to act ethically, apply appropriate GAAP standards, and maintain high quality earnings. However, if there are areas where your company can improve financial ratios and trends, you want to take advantage of these opportunities and implement relevant strategies. For Module 12, your focus will be on the financial statement analysis.

You will complete four accounting tasks as well as answer several multiple choice questions to confirm what you know:

1. Balance Sheet Analysis
2. Income Statement Analysis
3. Calculate Financial Ratios
4. DuPont Analysis

For each task, review its specific instructions and complete the required data entry or tables provided.

Balance Sheet Analysis

2.5 points possible (graded)

Horizontal Analysis

Below is your comparative balance sheet. Using horizontal analysis, first calculate the amount of the change from Year 1 to Year 2. For accounts that decreased, enter amount as negative. For the last column, calculate the percentage change from Year 1 to Year 2. For amounts that decreased, enter as negative. For dollar amounts, do not enter commas, dollar signs, or decimals. For percentages, convert to percent format (e.g. 0.6543 to 65.43).

Vertical Analysis

Below is select information from your balance sheet. Perform vertical analysis for Year 2. For percentages, convert to percent format (e.g. 0.6543 to 65.43). Round answers to two decimal places.

Balance Sheet of Your Lemonade Stand for Years 1 and 2 - Horizontal Year 2 Year 1 Increase or (Decrease) % Change 1 Assets 2 Current Assets: 3 Cash 100,000 4 Accounts Receivable 110,000 65,000 145,000 121,000 18,500 5 84,000 Inventory Supplies 6 16,000 7 Total Current Assets 349,500 310,000 1,350,000 -120,000 8 Equipment 9 (Less) Accumulated Depreciation 10 Long Term Investments 11 Total Assets 1,450,000 -180,000 78,000 1,697,500 60,000 1,600,000 12 Liabilities 13 Current Liabilities: 14 19,000 13,000 15 3,500 6,000 Accounts Payable Salaries Payable Interest Payable Total Current Liabilities 16 7,000 8,000 17 29,500 27,000 18 Long Term Liabilities 75,000 0 19 104,500 27,000 20 Total Liablities Shareholders' Equity Common Stock 21 1,000,000 1,000,000 22 500,000 500,000 23 73,000 Additional Paid in Capital Retained Earnings Treasury Stock Total Shareholders' Equity Total Liabilities and Equity 119,000 -26,000 24 0 25 1,573,000 1,593,000 1,697,500 26 1,600,000 Balance Sheet of Your Lemonade Stand for Year 2 - Vertical Year 2 Vertical Analysis Assets 1 2 Current Assets: 3 Cash 65,000 4 Accounts Receivable 145,000 5 Inventory 121,000 6 Supplies 18,500 7 Total Current Assets 349,500 8 1,450,000 9 Equipment (Less) Accumulated Depreciation Long Term Investments 180,000 10 78,000 11 Total Assets 1,697,500 12 Liabilities 13 Current Liabilities: 14 19,000 15 Accounts Payable Salaries Payable Interest Payable 3,500 16 7,000 17 Total Current Liabilities 29,500 18 Long Term Liabilities 75,000 19 Total Liablities 104,500 20 21 Shareholders' Equity Total Shareholders' Equity Total Liabilities and Equity 1,593,000 22 1,697,500