Common$-$Size Financial Statement Analysis Using Excel

Completing this activity will help you learn to:

create Excel formulas using cell references.

create absolute cell references to perform calculations efficiently and correctly.

apply conditional formatting to highlight cells based on criteria that you specify.

overall sales. You also want to highlight cells according to whether the calculated ratio increases or decreases more than a specified amount.

Required:

Download spreadsheet CommonSizeCaseData$-2$c$05$bb$.$xlsx

will use conditional formatting to visually differentiate between cells that reflect increases and cells that reflect decreases over a specified percentage.

HINT: STEP$-$BY$-$STEP WALKTHROUGH

Horizontal analysis: Create a new sheet within your Excel workbook that you will use to perform the horizontal analysis, comparing each year's income statement item to its corresponding item in $1.$

formula in cell B$2$ that can be copied and pasted to all cells? Note that there are negative values in the Financial Statement Data sheet. Choose the correct formula.

I. $=$'Financial Statement Data'!$B$2/\text{'}$Financial Statement Data'!B$2$

II$.=$'Financial Statement Data'!B$2/\text{'}$Financial Statement Data'!$B$2$

III. $=$'Financial Statement Data'!B$2/\text{'}$Financial Statement Data'!B $$2$

IV$.=$'Financial Statement Data'!B$2/\text{'}$Financial Statement Data'!$B$$2$

b$.$ Copy and paste that one formula to all the relevant cells in your new sheet. Round your answers to two decimal places. Explain the use of the common size financial statements. If you were a manager, which area would require further analysis?

The input in the box below will not be graded, but may be reviewed and considered by your instructor. $\backslash$table$[[$Line Items,Year $1,$Year $2,$Year $3,$Year $4,$Year $5],[$Net Sales,$$225,000\mathrm{.}00,$$$200,000\mathrm{.}00,$$$210,000\mathrm{.}00,$$$230,000\mathrm{.}00,$$$250,000\mathrm{.}00],[$Less: Cost of Goods Sold,$($$$125,000\mathrm{.}00),($$$115,500\mathrm{.}00),($$$120,500\mathrm{.}00),($$$130,000\mathrm{.}00),($$$140,000\mathrm{.}00)],[$Gross Margin,$$100,000\mathrm{.}00,$$$84,500\mathrm{.}00,$$$89,500\mathrm{.}00,$$$100,000\mathrm{.}00,$$$110,000\mathrm{.}00],[$Less: Operating Expenses,$($$$55,000\mathrm{.}00),($$$45,000\mathrm{.}00),($$$42,500\mathrm{.}00),($$$52,500\mathrm{.}00),($$$65,000\mathrm{.}00)],[$Less: Taxes,$($$$15,500\mathrm{.}00),($$$14,100\mathrm{.}00),($$$16,000\mathrm{.}00),($$$16,500\mathrm{.}00),($$$18,000\mathrm{.}00)],[$Net Income,$$29,500\mathrm{.}00,$$$25,400\mathrm{.}00,$$$31,000\mathrm{.}00,$$$31,000\mathrm{.}00,$$$27,000\mathrm{.}00],[,,,,,]]$