Pippin Piping Co. manufactures decorative fabric trims. The company’s financial statements follow.

Required

a. Prepare a horizontal analysis for 2020. What significant changes do you see? (Round to 1 decimal place.)

b. Prepare common-size financial statements for the three years. What significant changes do you see? (Round to 1 decimal place.)

c. Assess Pippin’s liquidity Has it improved or deteriorated over the three-year period? How did you reach your conclusion? (For ratios that require average balances, only calculate ratios for 2019 and 2020.)

d. Assess Pippin’s leverage. Has it improved or deteriorated over the three-year period? How did you reach your conclusion? (For ratios that require average balances, only calculate ratios for 2019 and 2020.)

e. Assess Pippin’s profitability. Has it improved or deteriorated over the three-year period? How did you reach your conclusion? (For ratios that require average balances, only calculate ratios for 2019 and 2020.)

f. Is Pippin’s financial leverage positive or negative? How do you know?

g. How does the market view Pippin? Has the market’s outlook improved or deteriorated over the three-year period? How did you reach your conclusion?

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Pippin Piping Co. Comparative Income Statements For the Years Ended December 31 2020 2019 2018 Sales revenue $576,600 $523,000 $484,200 Cost of goods sold 291,000 259,200 234,300 Gross margin Operating expenses 285,600 263,800 249,900 106,200 104,600 104,100 Operating income Other revenue 179,400 159,200 145,800 22,500 15,900 23,900 Interest expense 11,200 10,500 11,900 Income before income tax 190,700 164,600 157,800 Income tax expense (40%) 76,280 65,840 63,120 Net income $114,420 $ 98,760 $ 94,680 Pippin Piping Co. Comparative Balance Sheets As of December 31 2020 2019 2018 Assets Cash $ 32,000 $ 25,800 $ 20,500 Accounts receivable (net) 126,860 127,000 94,300 Inventory Prepaid expenses 60,000 80,700 56,000 11,000 10,000 4,600 Total current assets 229,860 243,500 175,400 Property & equipment (net) 668,900 576,000 540,300 Total Assets $898,760 $819,500 $715,700