The financial statements for Burch Industries follow:

Burch Industries

Consolidated Income Statements

(In thousands, except per share data)

Burch Industries
Consolidated Balance Sheets (in thousands)

Required:
1. Prepare common size income statements to be used for horizontal analysis for Burch for 2017 to 2019 (in percentage terms, rounded to two decimal places). Utilize 2017 as the base year for both 2018 and 2019. You do not need to include the actual dollar amounts shown above.
2. Indicate why Burch's net income increased between 2017 and 2019.
3. Prepare common size balance sheets to be used for vertical analysis for 2019 and 2018 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.
4. Indicate whether the proportion of dollars invested in the various categories of assets has changed significantly between 2018 and 2019.
5. Indicate whether the proportion of capital raised from the various liability categories and common stockholders' equity has changed significantly between 2018 and 2019.
6. Describe Burch's performance and financial position.

Transcribed Image Text:

Year ended December 31, 2018 2019 2017 $3,930,984 $3,003,610 Revenues $3,405,211 Costs and expenses: Cost of goods sold Selling and administrative $2,386,993 $2,089,089 761,498 30,665 $1,850,530 664,061 27,316 (43) 922,261 25,739 1,475 Interest Other expenses (income) Total costs and expenses Income before income taxes Income taxes Net income 2,141 $3,336,468 $2,883,393 $ 521,818 $2,541,864 $ 461,746 174,700 $ 287,046 $ 594,516 229,500 $ 365,016 192,600 $ 329,218 December 31, 2019 2018 ASSETS Current assets: $ 291,284 $ 260,050 Cash and equivalents Accounts receivable, less allowance for doubtful accounts of $19,447 and $20,046 667,547 592,986 26,378 42,452 $1,620,647 $ 571,032 (193,037) $ 377,995 157,894 30,927 $2,187,463 596,018 471,202 27,511 32,977 $1,387,758 $ 497,795 (151,758) $ 346,037 110,363 28,703 $1,872,861 Inventories Deferred income taxes Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt Notes payable Accounts payable Accrued liabilities 24 52,985 108, 165 135,701 138,563 17,150 $ 452,564 15,033 29,965 43,575 3,652 105,696 134,729 134,089 42,422 $ 420,588 77,022 27,074 23,728 Income taxes payable Total current liabilities Long-term debt Noncurrent deferred income taxes Other noncurrent liabilities Commitments and contingencies Redeemable prefered stock Total liabilities Stockholders' equity: Common stock at stated value: Class A convertible–26,691 and 26,919 shares outstanding $ Class B-49,161 and 48,591 shares outstanding Capital in excess of stated value Treasury stock (common at cost) Retained eamings Total stockholders' equity Total liabilities and stockholders' equity 300 300 $ 541,437 $ 548,712 24 159 2,720 108,451 (7,790) 161 2,716 93,799 (6,860) 1,542,486 $1,646,026 $2,187,463 1,234,333 $1,324,149 $1,872,861