E13.

3 Prepare horizontal analysis

Here is financial information for Glitter, Inc.

December 31, 2022 December 31, 2021

Current assets $106,000 $90,000
Plant assets (net) 400,000 350,000
Current liabilities 99,000 65,000
Long-term liabilities 122,000 90,000
Common stock, $1 par 130,000 115,000
Reained earnings 155,000 170,000

Instructions
Prepare a schedule showing a horizontal analysis for 2022, using 2021 as the base year.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a

2022 2021
Assets
Current assets $106,000 $90,000
Plant assets (net) 400,000 350,000
Total assets $506,000 $440,000

Liabilities
Current liabilities $99,000 $65,000
Long-term liabilities 122,000 90,000
Total liabilities $221,000 $155,000

Stockholders' equity
Common stock, $1 par $130,000 $115,000
Retained earnings 155,000 170,000
Total stockholders' equity $285,000 $285,000
Total liabilities and stockholders' equity $506,000 $440,000

After you have completed E13.3, consider the additional question.

1. Assume that the 2022 balances for plant assets (net), long-term liabilities and retained earnings cha
$435,000, $147.0000, and $165,000 respectively. Show the impact of these changes on the horizo
analysis.
 2022 2021
Assets
Current assets $106,000 $90,000
Plant assets (net) 435,000 350,000
Total assets $541,000 $440,000

Liabilities
Current liabilities $99,000 $65,000
Long-term liabilities 147,000 90,000
Total liabilities $246,000 $155,000

Stockholders' equity
Common stock, $1 par $130,000 $115,000
Retained earnings 165,000 170,000
Total stockholders' equity $295,000 $285,000
Total liabilities and stockholders' equity $541,000 $440,000
 a formula in cells with a "?" .

Increase or (Decrease)
Amount Percentage

$16,000 17.8%
50,000 14.3%
$66,000 15.0%

$34,000 52.3%
32,000 35.6%
$66,000 42.6%

$15,000 13.0%
-$15,000 -8.8%
$0 0.0%
$66,000 15.0%

and retained earnings changed to

se changes on the horizontal
 Increase or (Decrease)
Amount Percentage

$16,000 17.8%
85,000 24.3%
$101,000 23.0%

$34,000 52.3%
57,000 63.3%
$91,000 58.7%

$15,000 13.0%
-$5,000 -2.9%
$10,000 3.5%
$101,000 23.0%
E13.4 Prepare vertical analysis
Operating data for Joshua Corporation are presented below.

2022 2021
Sales revenue $800,000 $600,000
Cost of goods sold 520,000 408,000
Selling expenses 120,000 72,000
Administrative expenses 60,000 48,000
Income tax expense 30,000 24,000
Net income 70,000 48,000

Instructions
Prepare a schedule showing a vertical analysis for 2022 and 2021.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a

JOSHUA CORPORATION
Condensed Income Statement
For the Years Ended December 31
2022 2021
Amount Percent Amount Percent
Sales revenue $800,000 100.0% $600,000 100.0%
Cost of goods sold 520,000 65.0% 408,000 68.0%
Gross profit 280,000 35.0% 192,000 32.0%
Selling expenses 120,000 15.0% 72,000 12.0%
Administrative expenses 60,000 7.5% 48,000 8.0%
Total operating expenses 180,000 22.5% 120,000 20.0%
Income before income taxes 100,000 12.5% 72,000 12.0%
Income tax expense 30,000 3.8% 24,000 4.0%
Net income $70,000 8.8% $48,000 8.0%

After you have completed E13.4, consider the additional question.

1. Assume that sales revenue in 2022 changed to $755,000 and cost of goods changed to $512,00
Income tax rate is 30%. Show the impact of these changes on the vertical analysis of the income
statement.

JOSHUA CORPORATION
Condensed Income Statement
For the Years Ended December 31
 2022 2021
Amount Percent Amount Percent
Sales revenue $755,000 100.0% $600,000 100.0%
Cost of goods sold 512,000 67.8% 408,000 68.0%
Gross profit 243,000 32.2% 192,000 32.0%
Selling expenses 120,000 15.9% 72,000 12.0%
Administrative expenses 60,000 7.9% 48,000 8.0%
Total operating expenses 180,000 23.8% 120,000 20.0%
Income before income taxes 63,000 8.3% 72,000 12.0%
Income tax expense 18,900 2.5% 24,000 4.0%
Net income $44,100 5.8% $48,000 8.0%
r or a formula in cells with a "?" .

of goods changed to $512,000.

vertical analysis of the income
P13.3A Perform ratio analysis, and discuss change in financial position and operating results
Condensed balance sheet and income statement data for Jergan Corporation are presented here.

JERGAN CORPORATION
Balance Sheet
December 31
2022 2021 2020
Cash $ 30,000 $ 20,000 $ 18,000
Accounts receivable (net) 50,000 45,000 48,000
Other current assets 90,000 95,000 64,000
Investments 55,000 70,000 45,000
Plant and equipment (net) 500,000 370,000 358,000
$ 725,000 $ 600,000 $ 533,000

Current liabilities $ 85,000 $ 80,000 $ 70,000

Long-term debt 145,000 85,000 50,000
Common stock, $10 par 320,000 310,000 300,000
Retained Earnings 175,000 125,000 113,000
$ 725,000 $ 600,000 $ 533,000

JERGAN CORPORATION
Income Statement
For the Year Ended December 31
2022 2021
Sales revenue $ 740,000 $ 600,000
Less: Sales return and allowances 40,000 30,000
Net sales 700,000 570,000
Cost of goods sold 425,000 350,000
Gross profit 275,000 220,000
Operating expenses (including income taxes) 180,000 150,000
Net income $ 95,000 $ 70,000

Additional information:
1. The market price of Jergan's common stock was $7.00, $7.50, and $8.50 for 2020,
2021, and 2022, respectively.
2. You must compute dividends paid. All dividends were paid in cash.

Instructions
(a) Compute the following ratios for 2021 and 2022.
(1) Profit margin. 5. Price-earnings ratio.
(2) Gross profit rate. 6. Payout ratio.
(3) Asset turnover. 7. Debt to assets ratio.
 (4) Earnings per share.
(b) Based on the ratios calculated, discuss briefly the improvement or lack thereof in the
financial position and operating results from 2021 to 2022 of Jergan Corporation.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a

(a)(1) Profit margin

2022 2021
Net income $95,000 $70,000
Net sales $700,000 $570,000
Profit margin 13.6% 12.3%

(a)(2) Gross profit rate

2022 2021
Gross profit $275,000 $220,000
Net sales $700,000 $570,000
Gross profit rate 39.3% 38.6%

(a)(3) Asset turnover

2022 2021
Total assets, 2022 $725,000
Total assets, 2021 $600,000 $600,000
Total assets, 2020 $533,000
Average total assets $662,500 $566,500

2022 2021
Net sales $700,000 $570,000
Average total assets $662,500 $566,500
Asset turnover 1.1 1.0

(a)(4) Earnings per share

2022 2021
Common shares outstanding, 2022 37,647
Common shares outstanding, 2021 41,333 41,333
Common shares outstanding, 2020 42,857
Average common shares outstanding 39,490 42,095

2022 2021
Net income - Pfd. Dividends $95,000 $70,000
 Average common shares outstanding 39,490 42,095
Earnings per share $2.41 $1.66

(a)(5) Price-earnings ratio

2022 2021
Stock price per share $8.50 $7.50
Earnings per share $2.41 $1.66
Price-earnings ratio 3.5 4.5

(a)(6) Payout ratio

2022 2021
Prior year's retained earnings $125,000 $113,000
Plus: current year net income 95,000 70,000
Less: current year's retained earnings 175,000 125,000
Cash dividends declared $45,000 $58,000

2022 2021
Cash dividends declared (common) $45,000 $58,000
Net income $95,000 $70,000
Payout ratio 47% 83%

(a)(7) Debt to assets ratio

2022 2021
Current Liabilities $85,000 $80,000
Long-term debt $145,000 $85,000
Total liabilities $230,000 $165,000
Total assets $725,000 $600,000
Debt to assets ratio 32% 28%

After you have completed P13.3A, consider the additional question.

1. Assume that 2022 net income and total assets changed to $87,000 and total assets to
$700,000. Show the impact of these changes on the ratios.

(a)(1) Profit margin

2022 2021
Net income $87,000 $70,000
Net sales $700,000 $570,000
 Profit margin 12.4% 12.3%

(a)(2) Gross profit rate

2022 2021
Gross profit $275,000 $220,000
Net sales $700,000 $570,000
Gross profit rate 39.3% 38.6%

(a)(3) Asset turnover

2022 2021
Total assets, 2022 $700,000
Total assets, 2021 $600,000 $600,000
Total assets, 2020 $533,000
Average total assets $650,000 $566,500

2022 2021
Net sales $700,000 $570,000
Average total assets $650,000 $566,500
Asset turnover 1.1 1.0

(a)(4) Earnings per share

2022 2021
Common shares outstanding, 2022 37,647
Common shares outstanding, 2021 41,333 41,333
Common shares outstanding, 2020 42,857
Average common shares outstanding 39,490 42,095

2022 2021
Net income - Pfd. Dividends $87,000 $70,000
Average common shares outstanding 39,490 42,095
Earnings per share $2.20 $1.66

(a)(5) Price-earnings ratio

2022 2021
Stock price per share $8.50 $7.50
Earnings per share $2.20 $1.66
Price-earnings ratio 3.9 4.5
(a)(6) Payout ratio
2022 2021
Prior year's retained earnings $125,000 $113,000
Plus: current year net income 87,000 70,000
Less: current year's retained earnings 175,000 125,000
Cash dividends declared $37,000 $58,000

2022 2021
Cash dividends declared (common) $37,000 $58,000
Net income $87,000 $70,000
Payout ratio 43% 83%

(a)(7) Debt to assets ratio

2022 2021
Current Liabilities $85,000 $80,000
Long-term debt $145,000 $85,000
Total liabilities $230,000 $165,000
Total assets $700,000 $600,000
Debt to assets ratio 33% 28%
sented here.
ormula in cells with a "?" .