MIDTERM ASSESSMENT

The Midterm Assessment



Table of Contents

Analysis of Vertical Balance Sheet of Company A3

Analysis of Vertical Income Statement of Company A3

Analysis of Vertical Balance Sheet of Company B4

Analysis of Vertical Income Statement of Company B4

Analysis of Horizontal Balance Sheet of Company A5

Analysis of Horizontal Income Statement of Company A5

Ratio Analysis of Company A6

Ratio Analysis of Company B7

Comparasion of two Companies7

Conclusion8

References9

Exhibits10

The Midterm Assessment

Analysis of Vertical Balance Sheet of Company A

As shown in Exhiits below, the table labeled as vertical analysis of Balance sheet of Company A (McGraw-Hill Higher Education, 2007, n.d.), Cash and cash eqivalents are 30.44% and 34.74% of total assets during the year 2011 and 2010. Shor term investments are 5% and 8% for the year 2011 and 2010 of the total assets. Accounts receivable represents 9.3% and 9.5% of the total assets, prepaid expenses represent 3% and 2.4% of total assets in the analyzed years. Inventories of company A are 16% and 10% of total assets in 2011 and 2010.

Machinery and land represnet 35% and 11% in the year 2011 of total assets., which is quite high and simialrly it is 35% and 12% of total assets in the year 2010. However, the fixed assets represent more than half i.e. 51% of total assets in the year 2011 and 48% in the year 2010.

Account payables are 6% of total assets in 2011 and 4% in 2010. Company has increased its capital, which is represented by 33% of contibution to total assets in 2011 and 34% in 2010. Retained earnings show that company has retained about 52% of profits as expressed in terms of assets in the year 2011 for further expansions and investments. Total shareholder investment is 87% of total assets in 2011 and 89% in 2010.

Analysis of Vertical Income Statement of Company A

As exhibited in Table named as Vertical analysis of Income statement of Company A (McGraw-Hill Higher Education, 2007, n.d.), cost of goodssold is 64.68% of total Sales for the year 2011 due to which Gross profit decreased and it is 35.32% of the sales. Operating expenses, represent 12.7% of total sales in 2011 and 12.83% in 2010 and includes selling, adminstartive and research and development related costs. Income before taxes is 24% of total sales in 2011 and 25% in 2010. The income tax expense represents 8% of sales in both the years analyzed. The net income is 16% of sales in 2011 and 16.8% of sales in 2011 and 2010.

Analysis of Vertical Balance Sheet of Company B

As shown in Exhiits below, the table labeled as vertical analysis of Balance sheet of Company B (McGraw-Hill Higher Education, 2007, n.d.), Cash and cash eqivalents are 8.25% and 8.26% of total assets during the year 2011 and 2010, it has increased by only 4% over the year. Accounts receivable has also increased by 4.89% and represents 26.3% and 26% of the total assets, prepaid expenses represent 3% and 5% of total assets in the analyzed years and represent a decrease of 60% in a year time ...