The financial statements for Matt€™s Hats, Inc., appear shown below.

Required:
1. Prepare common income statements to be used for horizontal analysis for Matt€™s Hats for 2007 to 2009.
2. Indicate why Matt€™s net income increased between 2007 and 2009.
3. Prepare common size balance sheets to be used for vertical analysis for 2009 and 2008.
4. Determine whether the proportion of dollars invested in the various categories of assets has changed significantly between 2008 and 2009.
5. Determine whether the proportion of capital raised from the various liability categories and common shareholders€™ equity has changed significantly between 2008 and 2009.
6. Indicate how you would describe Matt€™s performance and financialposition?

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Matt's Hats, Inc. Income Statement Year Ended December 31, (In thousands, except per share data) Revenues Costs and 2009 $4,102,721 $2,256,236 2008 $3,652,412 $2,234,985 2007 $3,178,569 es Cost of goods sold $1,952,123 598,236 31,853 (102) 927,412 653,986 Interest 23,974 Other expenses (income) Total costs and expenses 3,209,547 247,692 Matt's Hats, Inc. 728,59 5%,459 163,524 e before income taxes $ 893,174 e taxes Net income December 31, ASSETS 2009 2008 Current assets $ 301,695 Cash and equivalents Accounts receivable, less allowance for doubtul accounts of $20,568 and $18,322 670,469 604,236 469,582 24,397 36,478 $1,404,341 ,239 148,231 $ 353,008 695 Inventories Deferred income taxes 43,624 $1,640,599 $ 583,152 206,452 S 376,700 162,325 Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net propety, plant, and equipment Goodwill Other assets Total assets $2,208,782 $1,908,642 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt Notes payable Accrued liabilities Income taxes payable $ 63,169 112,596 128,696 143,874 23,541 471,876 16,254 33,489 46,685 110,423 139,364 133,569 38,972 427,993 83,456 31,238 27,434 nts payable Total current liabilities debt Long-term Noncurrent deferred income taxes Other noncurrent liabilities Commitments and contingencies Redeemable preferred stock Total liabilities Shareholders' equity: 200 200 570,321 Common stock at stated value: Class A convertible-27,723 and 25,832 shares outstanding Class B 49,756 and 47,652 ares Capital in excess of stated value Treasury stock (common at cost) Retained earnings 3,152 110,596 (8,741) 1,535,107 1,640,278 2,208,782 in 96,546 Total stockholders' equity Total liabilities and stockholders' equity 1,246,339 $1,338,321 $1,908,642