Horizontal and Vertical Analysis on Financial Statements - 1375 Words

Expanded (Horizontal and Vertical) Analysis on Financial Statements (Research Paper Sample) Content: Expanded (Horizontal and Vertical) Analysis on Financial StatementsStudents NameInstitutions AffiliationHorizontal and Vertical AnalysisIntroductionThis analysis was conducted to perform an expanded analysis of financial statements for the Coca Cola Company (KO). Expanded study involves horizontal and vertical analysis. For vertical analysis, each amount on a given financial statement is expressed as a percentage of another item (Chen Shimerda, 1981). Vertical analysis for a balance sheet involves computation of every amount as a percentage of the total assets while the vertical analysis of an income statement includes calculation of every amount as a percentage of sales (Chen Shimerda, 1981). The horizontal investigation compares the financial statements over past years (Barnes, 1987). This analysis was also used to study, the ratio analysis which is a tool developed to conduct a quantitative analysis of the financial statements. The following financial ratios wer e considered in the analysis; inventory turnover, receivable turnover, gross profit margin, asset turnover, current ratio, quick ratio, cash ratio, and debt to assets ratio. Inventory turnover is calculated by dividing the cost of goods sold by the inventory while receivable turnover is obtained by dividing net revenue with average receivables (Altman, 1968). For the gross profit margin, gross income is divided by net revenue while the asset turnover is given by dividing net revenues by total assets (Ohlson, 1980). Current ratio compares the current assets to the current liabilities whereas quick ratio compares cash, short term marketable securities and accounts receivables to current liabilities. Cash ratio is gotten by dividing cash and marketable securities by current liabilities and lastly, debt to assets ratio compares the as liabilities of a company to the assets (Lewellen, 2004). The credit worthiness of the firm was determined using Altmans Z score which determines if a firm will become bankrupt or not.Z-Score= ([Working Capital/ Total Assets]x1.2) + ([Retained Earnings/ Total Assets] x 1.4) + ([Operating Earnings/ Total Assets] x 3.3) + ([Market Capitalization/ Total Liabilities] x 0.6) + ([Sales/ Total Assets] x 1.0) (Altman et.al, 2014)If the Z score is less than three then, the business is likely to become bankrupt whereas a Z score greater than three shows financial soundness of a firm.Data and AnalysisBalance Sheet All numbers in thousands Period Ending 12/31/2016 Vertical Analysis 12/31/2015 Vertical Analysis 12/31/2014 Vertical Analysis Current Assets Cash And Cash Equivalents 8,555,000 9.80% 7,309,000 8.12% 8,958,000 9.73% Short Term Investments 13,646,000 15.64% 12,591,000 13.99% 12,717,000 13.82% Net Receivables 3,856,000 4.42% 3,941,000 4.38% 4,466,000 4.85% Inventory 2,675,000 3.07% 2,902,000 3.22% 3,100,000 3.37% Other Current Assets 5,278,000 6.05% 6,652,000 7.39% 3,745,000 4.07% Total Current Assets 34,010,000 38.97% 33,395,000 37.11% 32,986,000 35.85% Long Term Investments 17,249,000 19.77% 15,788,000 17.54% 13,625,000 14.81% Property Plant and Equipment 10,635,000 12.19% 12,571,000 13.97% 14,633,000 15.90% Goodwill 10,629,000 12.18% 11,289,000 12.54% 12,100,000 13.15% Intangible Assets 10,499,000 12.03% 12,843,000 14.27% 14,272,000 15.51% Accumulated Amortization - - - Other Assets 4,248,000 4.87% 4,110,000 4.57% 4,407,000 4.79% Deferred Long Term Asset Charges - - - Total Assets 87,270,000 100.00% 89,996,000 100.00% 92,023,000 100.00% Current Liabilities Accounts Payable 9,797,000 11.23% 9,991,000 11.10% 9,634,000 10.47% Short/Current Long Term Debt 16,025,000 18.36% 15,805,000 17.56% 22,682,000 24.65% Other Current Liabilities 710,000 0.81% 1,133,000 1.26% 58,000 0.06% Total Current Liabilities 26,532,000 30.40% 26,929,000 29.92% 32,374,000 35.18% Long Term Debt 29,684,000 34.01% 28,311,000 31.46% 19,063,000 20.72% Other Liabilities 4,081,000 4.68% 4,301,000 4.78% 4,389,00 0 4.77% Deferred Long Term Liability Charges 3,753,000 4.30% 4,691,000 5.21% 5,636,000 6.12% Minority Interest 158,000 0.18% 210,000 0.23% 241,000 0.26% Negative Goodwill - - - Total Liabilities 64,208,000 73.57% 64,442,000 71.61% 61,703,000 67.05% Stockholders' Equity Misc. Stocks Options Warrants - - - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 1,760,000 2.02% 1,760,000 1.96% 1,760,000 1.91% Retained Earnings 65,502,000 75.06% 65,018,000 72.25% 63,408,000 68.90% Treasury Stock -47,988,000 -54.99% -45,066,000 -50.08% -42,225,000 -45.89% Capital Surplus 14,993,000 17.18% 14,016,000 15.57% 13,154,000 14.29% Other Stockholder Equity -11,205,000 -12.84% -10,174,000 -11.30% -5,777,000 -6.28% Total Stockholder Equity 23,062,000 26.43% 25,554,000 28.39% 30,320,000 32.95% Net Tangible Assets 1,934,000 2.22% 1,422,000 1.58% 3,948,000 4.29% Balance Sheet All numbers in thousands Period Ending Horizontal analysis between 2015 and 2016 Horizontal Analysis between 2014 and 2015 Current Assets Cash And Cash Equivalents 14.56% -22.56% Short Term Investments 7.73% -1.00% Net Receivables -2.20% -13.32% Inventory -8.49% -6.82% Other Current Assets -26.03% 43.70% Total Current Assets 1.81% 1.22% Long Term Investments 8.47% 13.70% Property Plant and Equipment -18.20% -16.40% Goodwill -6.21% -7.18% Intangible Assets -22.33% -11.13% Accumulated Amortization Other Assets 3.25% -7.23% Deferred Long Term Asset Charges Total Assets -3.12% -2.25% Current Liabilities Accounts Payable -1.98% 3.57% Short/Current Long Term Debt 1.37% -43.51% Other Current Liabilities -59.58% 94.88% Total Current Liabilities -1.50% -20.22% Long Term Debt 4.63% 32.67% Other Liabilities -5.39% -2.05% Deferred Long Term Liability Charges -24.99% -20.14% Minority Interest -32.91% -14.76% Negative Goodwill Total Liabilities -0.36% 4.25% Stockholders' Equity Misc. Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock 0.00% 0.00% Retained Earnings 0.74% 2.48% Treasury Stock 6.09% 6.30% Capital Surplus 6.52% 6.15% Other Stockholder Equity 9.20% 43.22% Total Stockholder Equity -10.81% -18.65% Net Tangible Assets 26.47% 17.70% Income Statement All numbers in thousands Revenue 12/31/2016 Vertical analysis 12/31/2015 Vertical Analysis 12/31/2014 Vertical Analysis Total Revenue 41,863,000 100.00% 44,294,000 100.00% 45,998,000 100.00% Cost of Revenue 16,465,000 39.33% 17,482,000 39.47% 17,889,000 38.89% Gross Profit 25,398,000 60.67% 26,812,000 60.53% 28,109,000 61.11% Operating Expenses...