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Ch Chap. 24) Slusher Company presents the following condensed comparative Income statements for 1995 and 1996: (Show computations in extra columns as needed.) FOR YEARS ENDED DECEMBER 31, 1996 1995 Sales (net) $100,000 $95,000 Cost of Goods Sold 70.000) (45,000) Gross Profit $30,000 $50.000 Operating Expenses (12.000) (20,000) Operating Income $18,000 $30.000 Dividend Revenue 1,000 2,000 Interest Expense (2.000) (5,000) Income before Income Taxes $17.000 $27,000 Income Tax Expense (6.800) (10.800) Net Income $10.200 $16.200 Number of common shares 5.000 3,000 Earnings per share $2.04 $5.40 REQUIRED: Based on the preceding information, prepare horizontal analyses for the years 1995 and 1996, using a base-year-to-date approach. What is your base year? Do your analyses reveal any favorable or unfavorable trends? ANSWER: Base Year 1995 Sales (net) Cost of Goods Sold Gross Profit Operating Expenses Operating Income Dividend Revenue Interest Expense Income before Income Taxes Income Tax Expense Net Income Number of common shares Earnings per share 1996 $100,000 170.000) $30,000 (12,000) $18,000 1.000 (2.000) $17,000 (6,800) $10,200 5,000 $2.04 +5,000 -25,000 -20,000 +8,000 -12.000 -1.000 +3,000 -10,000 -4.000 -6,000 2.000 -3.36 1995 595,000 (45.000) $50,000 (20,000) $30.000 2.000 (5,000) $27,000 (10,800) $16,200 3.000 $5.40 % change 5:3 55.6 40.0 40.0 -400 -50.0 60.0 -37.0 -37.0 COGS going up faster than sales. This is causing significantly less gross profit. Dividend revenue has been cut in half. The company is expanding shareholder control. 100 5.B. (Chap 24) The Samuels company presents the following condensed income statements and balance sheets: FOR YEARS ENDED DECEMBER 31, Income Statements 1996 1995 Sales (net) $100,000 100 $100,000 Cost of Goods Sold (69.000 -69 (55,000) Gross Profit $31.000 31 $45,000 Operating Expenses (21,000) -2120,000) Interest Revenue 1.000 1 1.400 Interest Expense 3.000) -3 12,500) Income before Income Taxes $8.000 8 $16.000 Income Tax Expense 13.200) -32 15,000) Net Income $4.800 43 $11.000 Earnings per share $2.00 FOR YEARS ENDED DECEMBER 31, Balance Sheets 1996 1995 Cash $13,000 8.7 $2,000 Receivables (net) 7.000 4.7 8,000 Inventories 31.000 20.7 12.000 Long-Term Investments 20.000 13.3 15.000 Property and Equipment 79.000 52.7 63.000 Total Assets $150.000 100 $100.000 Current Liabilities $40,000 26.7 $11,400 Bonds Payable, 10% 24.7 25,000 Common Stock. $2 par 12,000 8.0 11.600 116 Premium on Common Stock 21.000 14.0 19.500 19.5 Retained Earnings 40.000 32.500 32.5 Total Labies and Stockholders' Equity $150.000 100 100.000 100 REQUIRED: Based on the preceding information, prepare vertical analyses of the income statements and balance sheets for the 2 years. Do your analyses reveal any trends in the company's operations and financial position? 26.7 Gross profit has declined by 14% Operating expenses and interest expenses are increasing slightly. Income before taxes has dropped to half its 1995 level. Cash and inventory is increasing while Lt Investments and PPE are decreasing Current liabilities have more than doubled

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