133 horizontal analysis and vertical analysis including the preparation of common si 4305800

133 horizontal analysis and vertical analysis including the preparation of common si 4305800

133) Horizontal analysis and vertical analysis, including the preparation of common-size financial statements, are important analytical techniques used to evaluate the strength of published financial statements.

a) Define:

1) Horizontal analysis

2) Vertical analysis

3)Common-size financial statements

b) How is each of these techniques helpful in the analysis of financial statements?

134) The following table shows selected data for Wong Corporation for the past five years ended December 31, 2010:

20102009200820072006

Net sales$19,500$17,400$18,200$16,500$14,900

Cost of goods sold9,50010,3009,5008,9008,000

Inventory13,00012,2008,7009,5009,300

Net accounts receivable7,5006,8007,2007,0006,500

a) Prepare an analysis showing the trend percentages for the four years 2007-2010, using 2007 as the base year.

b) What was the inventory turnover for 2009?

c) What was the accounts receivable turnover for 2010?

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