Posted: June 15th, 2022

Write a 350-700 Accounting word memo discussing ratio calculations regarding a horizontal and veritcal analysis.

write a 350- to 700-word memo in Microsoft Word to the CEO of Berry’s Bug Blasters in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:

 

·        

What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?

·         Which users may be interested in each type of ratio?

·         What does the collected data reveal about the performance and position of the company?

 

Format your memo consistent with APA guidelines.

 

There is an excel spreadsheet to retrieve information for the memo.

ATTACHED FILE(S)

Horizontal

has a formula and should match the totals on the financial statements

and

.

2008 2007

%

Revenue

.00

3,249,581.00 3,893,028.00 (643,447.0) -17%

-17%

-17%

7%

-17%

2%

0

Account Titles 2008 2007 Variance %

0%

205,934.00

0%

-50%

.00

Account Titles

0

-17%

-16%

70,000.00 – 0 0%

Net Income

0

769,001.00

-36%

493,140.00

1,932,041.00 1,498,882.00 433,159.00 29%

HORIZONTAL ANALYSIS #1
INCOME STATEMENT
SHOW YOUR WORK (CALCULATIONS)
Enter the account titles from the Income statement for Berry’s Bug Blasters. There are two sections – revenue and expenses.
Use the format below to complete your first HORIZONTAL ANALYSIS. I tried to include enough lines for the sections.
Key your numbers anc calculations in the orange spaces.

Net income
for

2008 2007
Account Titles Variance
Revenue
3,249,581 3,893,028.00 (643,447.0) -17%
Total Revenue
Direct Expenses
salaries and wages 487,437.00 583,95

4.00 (96,517.0)
Vehicle Maintenance 64,992.00 77,861.00 (12,869.0)
Fuel 20,450.00 19,177.00 1,273.0
Traps and Chemicals 1,378,204.00 1,651,101.00 (272,897.0)
Total Direct Expenses 1,951,083.00 2,332,093.00 (381,010.0)

16%
Total Indirect Expenses 805,359.00 791,933.00 13,426.0
Net Income 493,139.0 769,002.00 (275,863.0)

36%
HORIZONTAL ANALYSIS #2
BALANCE SHEET
Enter the account titles from the Balance Sheet for Berry’s Bug Blasters There are three sections – assets, liabilities, and equity.
Use the format below to complete your second HORIZONTAL ANALYSIS. I tried to include enough lines for the sections.
Current Assets
Cash 818,441.00 291,703.00 526,738.00 181%
Accounts receivable 812,395.00 811,048.00 1,347.00
Inventory 205,934.00 – 0
Total current Assets 1,836,770.00 1,308,685.00 528,085.00 40%
Fixed Assets
Vehicles, net of accumulated depreciation 66,803.00 134,201.00 (67,398.00) -50%
Tools, net of accumulated depreciation 28,468.00 55,996.00 (27,528.00) -49%
Total Fixed assets 95,271.00 190,197.00 (94,926.00)
Total Assets 1,932,041 1,498,882.00 433,159.00 29%
Current Liabilities
Accrued payroll taxes 36,007.00 42,367.00 (6,360.00)

15%
Accounts Payable 270,798.0 324,419.00 (53,621.00)
Total current liabilities 306,805.00 366,786.00 (59,981.00)
Stockholder’s equity
Common stock 70,000.00
Retained earnings 1,062,096.00 293,095.00 769,001.00 262%
493,140.0 (275,861.00)
Total Stockholder’s equity 1,625,236.00 1,132,096.00 44%
Total Liabilities/Equity

Vertical

INCOME STATEMENT SHOW YOUR WORK (CALCULATIONS)
2008 2007

Account Titles

% Amount %

Direct Expenses

487,437.00 15% 583,954.00 15%

Vehicle Maintenance 64,992.00 2% 77,861.00 2%
Fuel 20,450.00 1% 19,177.00 0%
Traps and Chemicals 1,378,204.00

1,651,101.00 42%

Total Direct Expenses 1,951,083.00

2,332,093.00 60%

BALANCE SHEET

2008 2007 2008 2007
Account Titles Amount % Amount %

total liabilities +

Current Assets

total stockholders’ equity

Cash 818,441.00 42% 291,703.00

1,932,041.00 1,498,882.00

Accounts receivable 812,395.00 42% 811,048.00

Inventory 205,934.00

205,934.00

Total current Assets 1,836,770.00

1,308,685.00

Fixed Assets

66,803.00 3% 134,201.00 9%

28,468.00 1% 55,996.00 4%

Total Fixed assets 95,271.00 5% 190,197.00

2008 2007
Account Titles Amount % Amount %

Current Liabilities

Accrued payroll taxes 36,007.00 2% 42,367.00 3%
Accounts Payable 270,798.00 14% 324,419.00

Total current liabilities 306,805.00 16% 366,786.00

Common stock 70,000.00 4% 70,000.00 5%
Retained earnings 1,062,096.00

293,095.00

Net Income 493,140.00

769,001.00

Total Stockholder’s equity 1,625,236.00

1,132,096.00

VERTICAL ANALYSIS #1
Enter the account titles from the Income statement for Berry’s Bug Blasters There are two sections – revenue and expenses.
Use the format below to complete your first VERTICAL ANALYSIS. I tried to include enough lines for the sections.
NOTICE IT IS THE SAME SET OF NUMBERS, BUT THE CALCULATIONS ARE DIFFERENT.
2008 revenue 2007 revenue
Amount 3249581.00 3893028.00
Salaries and wages
42%
60%
VERTICAL ANALYSIS #2
Enter the account titles from the Balance Sheet for Berry’s Bug Blasters. There are three sections – assets, liabilities, and equity.
There are just enough lines to enter each set of numbers
Use the format below to complete your second VERTICAL ANALYSIS. I tried to include enough lines for the sections.
total liabilities +
total stockholders’ equity
19%
54%
11% 14%
95% 87%
Vehicles, Net of Acc Depr
Tools, Net of Acc Depr
13%
22%
24%
Shareholder’s equity
55% 20%
26% 51%
84% 76%

Liquidity

1

Current Assets 2008 1,836,770.00

Current Liabilities 306,805.00
2

2008

3

2008 3,249,581.00 4.00

4

Direct Expenses 2008 1,951,083.00

Avg inventory 205,934.00

SHOW YOUR WORK (CALCULATIONS)

LIQUIDITY
Current Ratio 5.99
Acid Test (Quick) Ratio Cash + ST+Receiv 1,630,836.00 5.32
Avg inventory 306,806.00
Receivables Turnover Net Credit sales (assume 25% of total Revenue is credit sales)
Average Net Receivables 811,722.00
Inventory Turnover 9.47
Enter the numerator and denominators above in orange for each year using the numbers from the financial reports for Bug Blasters
Enter the numerator and denominators above in orange using the numbers from the financial statements for Bug Blasters
If you can enter formulas for your calculations, that is OK. If you have to calculate off line (using a calculator for example), then just type the answer in the box
Make sure you review HOW THE RESULTS SHOULD BE DISPLAYED. Not all are percentages so be sure you know how the result should be presented.

Profitability

1

Net income 2008 493,140.0 15%

3,249,581

2

Net sales 2008 3,249,581

3

Net income 2008 493,140.0 29%

Average total assets 1,715,462

4

2008 493,139.0 36%

Enter the numerator and denominators above in orange using the numbers from the financial statements for Bug Blasters
If you can enter formulas for your calculations, that is OK. If you have to calculate off line (using a calculator for example), then just type the answer in the box
Make sure you review HOW THE RESULTS SHOULD BE DISPLAYED. Not all are percentages so be sure you know how the result should be presented.

SHOW YOUR WORK (CALCULATIONS)

PROFITABILITY
Profit margin
Net sales
Asset turnover 1.89
Average

total assets 1,715,462
Return on assets
Return on stockholders equity Net income – preferred
Avg total stockholder’s equity 1,378,666

Solvency

2008 270,798.0 14%

total assets 1,932,041

Enter the numerator and denominators above in orange using the numbers from the financial statements for Bug Blasters
If you can enter formulas for your calculations, that is OK. If you have to calculate off line (using a calculator for example), then just type the answer in the box
Make sure you review HOW THE RESULTS SHOULD BE DISPLAYED. Not all are percentages so be sure you know how the result should be presented.
SHOW YOUR WORK (CALCULATIONS)

SOLVENCY
Debt to assets ratio Total accounts payable
NOTE: SINCE THERE IS NO INTEREST EXPENSE, ONLY COMPLETE THE DEBT TO ASSETS RATIO NOT THE TIMES INTEREST EARNED

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