Trend Analysis, Horizontal Analysis, Vertical Analysis, Balance Sheet, Income Statement, Ratio Analysis
Trend Analysis, Horizontal Analysis, Vertical Analysis, Balance Sheet, Income Statement, Ratio Analysis
Trend Analysis, Horizontal Analysis, Vertical Analysis, Balance Sheet, Income Statement, Ratio Analysis
Balances!
ILLUSTRATIVE CASE FOR FINANCIAL STATEMENT ANALYSIS
Exhibit 1 ABC CORPORATION INCOME STATEMENTS (in 000s)
Statement of Income
2000 2001 2002
Revenue $104,618 $320,414 $635,191
FOOTNOTE:
1
Presented in same format as the Annual Report to the SEC on form 10-K; Interest paid is
shown as a negative number and interest earned from investments is shown as a positive.
2
Number of Shares of Common Stock:
Jan.1 Common Stock Shares 6,399,900 6,511,150 6,545,950
Exercise of Stock Options 111,250 34,800 811,623
Initial Public Offering 10,120,000
Auto. Conversion Preferred Stock 46,038,393
Employee Stock Purchase Plan 242,718
Other (272)
Year End Common Stock 6,511,150 6,545,950 63,758,412
TREND ANALYSIS of ABC CORPORATION FINANCIAL STATEMENTS
NOTE: The Trend Analysis can be done in two ways: a) Comparing each line item of a year with the
corresponding item of the base year (e.g., Revenue: 2001 ratio will be 349654/111632=3.13;
2002 ratio is 646237/111632=5.78); b) Divide each item by that year's REVENUE for the
Income Statement, and by TOTAL ASSETS for the Balance Sheet. The ratios of each item can be
compared to determine a trend.
Inventory 1.00
Current Assets 1.00
Total Fixed Assets 1.00
Total Assets: 1.00
B: Trend Analysis using Common Size Income Statement and Balance Sheet for each year,
on selected accounts.
C: EFFICIENCY:
D: DEBT:
Debt Ratio Long-term Debt/(Long-term Debt+Equity) 0.63 0.79
Times Interest Earned EBIT / Interest Expense 5.00 (2.62)
E: FINANCIAL:
Earnings Per Share (EPS) Net Income/ No. of Shares 0.77 ($10.22)
Price/Earnings (P/E) Market Price / EPS 35.17 N/A
Stock Price December 314 $200.00 $27.00 $12.10
Notes:
3
Net Income before preferred dividends should be used for these ratios
4
Stock not public prior to 2002, Price per share is assumed as $200 in 2001 and $100 in 2000.
ABC Stock Closed at $44.20 on first day of trading in April 2002 and $27.00 at year-end.
Stock Price is Actual at December 31, not an average. Competitor stock price was $12.10
on December 31, 2002 and $29.26 on December 31, 2001.