# RATIO ANALYSIS illustration 2 to 9

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## Description

RATIO
ANALYSIS

Ratio analysisexpresses the
relationship among selected items of financial statement data. A
ratioexpresses the mathematical relationship
between one quantity and another. For analysis of the primary financial
statements, we classify ratios as follows.

 Illustration 2-9 Financial ratio classifications

A single ratio by itself is not very meaningful.
Accordingly, in this and the following chapters, we will use various
comparisons to shed light on company performance:

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 1 Intracompany comparisons covering two years for the same company. 2 Industry-average comparisons based on average ratios for particular industries. 3 Intercompany comparisons based on comparisons with a competitor in the same industry

 Question 1

Using these data from
the comparative balance sheet of Rosalez Company, perform horizontal analysis.(If amount and percentage
are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000),
(20%). Round percentages to 0 decimal places, e.g. 12%.)

 Increase or (Decrease) Dec. 31, 2012 Dec. 31, 2011 Amount Percentage Accounts receivable \$ 545,500 \$ 393,400 \$ % Inventory \$ 820,400 \$ 604,600 \$ % Total assets \$3,146,500 \$2,742,100 \$ %

 Question 2

Using these data from
the comparative balance sheet of Rosalez Company, perform vertical analysis.(Round percentages to 1
decimal place, e.g. 12.5%.)

 Dec. 31, 2012 Dec. 31, 2011 Amount Percentage Amount Percentage Accounts receivable \$ 543,900 % \$ 417,700 % Inventory \$ 821,700 % \$ 617,000 % Total assets \$3,175,700 % \$2,787,300 %

 Question 3

Vertical analysis
(common-size) percentages for Vallejo Companyâ€™s sales, cost of goods sold, and
expenses are listed here.

 Vertical Analysis 2012 2011 2010 Sales 100 % 100 % 100 % Cost of goods sold 60.8 63.8 66.4 Expenses 24.7 27.8 28.8

Did Vallejoâ€™s net income as a percent of sales increase, decrease, or remain