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Horizantal & vertical analysis and Ratios

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1. Prepare horizontal and vertical analyses.
The comparative balance sheets of Philip Morris Companies, Inc. are presented here.

Comparative Balance Sheets
December 31
($ in millions)
Assets 2004 2003
Current assets $25,901 $21,382
Property, plant, and equipment (net) 16,305 16,067
Other assets 59,442 58,726
Total assets $101,648 $96,175

Liabilities and Stockholders' Equity
Current liabilities $23,574 $21,393
Long-term liabilities 47,360 49,705
Stockholders' equity 30,714 25,077
Total liabilities and stockholders equity $101,648 $96,175

Prepare horizontal analysis of the balance sheet data for Philip Morris using 2003 as a base. (Show the amount on increase or decrease as well.) Prepare a vertical analysis of the balance sheet data for Philip Morris for 2004.

2. Prepare horizontal and vertical analyses.
Here are the comparative income statements of Erik Corporation.

Comparative Income Statement
For the Years Ended December 31

2007 2006
Net sales $572,000 $520,000
Cost of goods sold 477,000 450,000
Gross profit $95,000 $70,000
Operating expenses 60,000 45,000
Net income $35,000 $25,000

Prepare a horizontal analysis of the income statement data for Erik Corporation using 2006 as a base. (Sow the amounts of increase or decrease). Prepare a vertical analysis of the income statement for Erik Corporation for both years.

3. Compute liquidity ratios.
Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions) for 2005 are presented on page 668.

End of Year Beginning of Year
Cash and cash equivalents $360.3 $340.3
Receivables (net) 645.7 666.8
Merchandise inventory 917.2 901.6
Other current assets 649.2 616.1
Total current assets $2,572.4 $2,524.8

Total current liabilities $1,341.2 $1,122.6

For the year, net credit sales were $7,131.4 million, cost of goods sold was $4,559.4 million, and cash from operations was $660.3 million.

Compute the current ratio, current cash debt coverage ratio, receivables turnover ratio, average collection period, inventory turnover ratio, and days in inventory at the end of the current year.

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Solution Summary

The solution contains the preparation of commo size balance sheet and income statement and also the comparative statement and also computation of ratios.