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Case Study: XYZ Manufacturing Company
Horizontal and Vertical Analysis
Background:
XYZ Manufacturing Company is a mid
sized firm that produces industrial equipment. The
company
s management is concerned about its financial performance over the last three
years and has asked its accounting department to perform both horizontal and vertical
analysis on its financial statements to assess the financial health and identify key trends.
Below are selected financial data from XYZ
s income statement for the last three years:
Item
Sales Revenue $
$
$
Cost of Goods Sold
COGS
$
$
$
Gross Profit $
$
$
Operating Expenses $
$
$
Operating Income $
$
$
Interest Expense $
$
$
Net Income $
$
$
Required:
What specific trend is most concerning in the horizontal analysis, and why
might it be problematic for XYZ Manufacturing Company in the long run?
marks
Despite an increase in sales revenue, the net income has decreased. What does
this tell you about XYZ
s overall financial strategy and its ability to maintain
profitability?
marks
conduct a vertical and horizantal analysis for this and show me how you solved it step by step
Answer & Explanation
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