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Question
The following items were taken from the financial statements of Ritz Inc., over a 4-year period:
Item Year 4 Year 3 Year 2 Year 1
Net Sales $800,000 $700,000 $550,000 $500,000
Cost of Goods Sold 560,000 500,000 420,000 400,000
Gross Margin $240,000 $200,000 $130,000 $100,000
Required: Using horizontal analysis and Year 1 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.
Answer
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Related questions
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________________ are the ongoing, day-to-day, revenue-generating activities of an organization.
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Dividing the market price of a share of stock by the earnings per share gives the price-earnings ratio.
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Q:
u200b
Kooper Co.
Income Statement
For the Year Ended December 31, Year 1
Revenues: u200b u200b
Net sales u200b $383,000
Less: Cost of goods sold u200b 121,700
Gross margin u200b $261,300
Less Operating expenses: u200b u200b
Selling expenses $41,500 u200b
Administrative expenses 56,500 u200b
Interest expense 12,000 u200b
Total expenses u200b 100,000
Net income u200b $151,300
Kooper Co.
Balance Sheet
December 31,Year 1
Assets
Current assets: u200b u200b u200b
Cash u200b $53,000 u200b
Accounts receivable u200b 64,300 u200b
Marketable securities u200b 10,500 u200b
Inventory u200b 93,250 u200b
Total current assets u200b u200b $221,050
Property, plant, and equipment: u200b u200b u200b
Store equipment $325,000 u200b u200b
Less Accumulated depreciation 162,100 $162,900 u200b
Office equipment $149,750 u200b u200b
Less Accumulated depreciation 72,750 77,000 u200b
Total property, plant, and equipment u200b u200b 239,900
Total assets u200b u200b $460,950
Liabilities
Current liabilities: u200b u200b u200b
Accounts payable u200b $97,200 u200b
Salaries payable u200b 28,700 u200b
Total current liabilities u200b u200b $125,900
Long-term liabilities: u200b u200b u200b
Note payable (due Year 1) u200b u200b 154,000
Total liabilities u200b u200b $279,900
Stockholders Equity
Total stockholders equity u200b u200b 181,050
Total liabilities and equity u200b u200b $460,950u200b
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B. return on total assets
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Cash $128,000 $201,000
Accounts receivable 472,000 438,000
Inventories 797,000 673,000
Prepaid expenses 81,000 92,000
Plant and equipment (net) 2,655,000 2,428,000
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Accounts payable $198,000 $280,600
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Preferred stock, 10%, $100 par 450,000 450,000
Common stock, no par 1,800,000 1,800,000
Retained earnings 685,000 301,400
Total liabilities and stockholders equity $4,133,000 $3,832,000
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Gross margin 2,160,000
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