Question no. 1 Current assets Cash and cash equivalents Accounts receivable (net) Inventories Prepaid expenses Total current assets Property, plant, and equipment Investments Intangibles and other assets Total assets SMD IT Solutions Balance Sheets December 31 2010 2009 Assets $330 $360 470 400 460 390 120 160 1,380 1,310 420 380 210 10 530 510 $2,540 $2,210 Liabilities and Owner's Equity Current liabilities Long-term liabilities Stockholders’ equity—common Total liabilities and stockholders’ equity $900 $790 610 380 1,030 1,040 $2,540 $2,210 Revenues Costs and expenses Cost of goods sold Gross Profit Selling & administrative expenses Interest expense Income before income taxes Income tax expense Net income SMD IT Solutions Income Statements For the Year Ended December 31 2010 2009 $3,900 $3,400 1,200 800 2,700 2,600 2,400 2,395 200 20 100 185 40 74 $60 $111

 Required: Perform the following analysis on the data above. Also, interpret the results individually for each part.

 1. Horizontal Analysis for 2010 [show table containing percentage changes in items]

  2. Vertical Analysis for 2009 and 2010 [show table containing percentages item wise]

  3. Current Ratio for 2009 and 2010 [write formula, put values, answer and interpretation] 

 4. Acid Test Ratio for 2009 and 2010 [write formula, put values, answer and interpretation] 2 Financial Statement Analysis Principles of Financial Accounting II 

 5. Average Collection Period for 2009 and 2010 [write formula, put values, answer and interpretation][use Receivables of 2009 as Average receivables for the ratio of 2009] 

 6. Days in Inventory for 2009 and 2010 [write formula, put values, answer and interpretation][use Inventory of 2009 as Average Inventory for the ratio of 2009]

Answer rating: 100% (QA)

1 Horizontal Analysis for 2010 Item 2010 2009 Change Cash and cash equivalents 330 360 83 Accounts receivable net 470 400 175 Inventories 460 390 179 ... View the full answer