ACCOUNTING-Horizontal and Vertical Financial Statement Analysis with Explanatory Narrative.

QUESTION

Horizontal and Vertical Financial Statement Analysis with Explanatory Narrative.
General
formatting requirements:Please construct visually attractive and easily readable worksheets.
Use separate tabs for your horizontal and vertical analyses in a single Excel
worksheet. Examples will be demonstrated in class. Round your calculated
percentages to the nearest one tenth of one percent (e.g., 100.0%; 65.2%; 4.3%,
etc.).

1. Use Excelto prepare a horizontal and a vertical analysis of the following
selected income statement components: Net revenues, gross profit, SG&A
expenses, and Net Income. Give each analysis a descriptive title. The specific
terminology and classifications will vary somewhat across companies. Use the
three most recent years’ income statement data to construct two horizontal
income statement analyses and three vertical analyses.

2. From Item 7 in your
company’s 10-K, locate management’s discussion and analysis of the company’s
financial condition, results of operations, and year-to-year changes in
them.

A. What business segments does
management use to report the company’s financial condition and results and
operations?

B. What factors does management
cite as reasons for the changes, trends, and relationships in your horizontal
and vertical spreadsheets? Organize your analysis under four headings: Net
revenues; inventory and cost of sales; SG&A expenses;, and Net Income. Your
narrative should require approximately 3-4 pages. In your narrative, please
refer to the specific horizontal or vertical percentages you are explaining,
describe more than one factor for each income component, identify relevant
offsetting factors when applicable, and when possible quantify the impact of
those factors.

Note: If management reports
these results separately for each segment, some of the year-to-year percentage
changes they discuss will not line up with the horizontal and vertical
percentages you calculated for your company as a whole. If this occurs, please
note it in your write-up.

ANSWER:

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