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DCI Corp
The horizontal analysis focuses on the year-over-year changes to the financial statements. At DCI, the company has seen disappointing performance the past three years. The company has seen its revenues grow over that time, but its net income has fallen. Net income growth was 7.6% in 2004 and 1.4% in 2005; net income fell 10.2% in 2004 and 34.2% in 2005. Of note, total expenses have continued to rise during the past three years, as has the cost of goods sold. The result has been flatlined gross profit and declining net income before taxes.
The vertical analysis reveals some of the changes to the company's net income position. The cost of goods sold was 51.3% of sales in 2003, 52.9% in 2004 and 55.2% in 2005. This increase contributes to the decline of profitability but is not...
Selling, general and administrative expenses were 34.4% of sales in 2003, 34.4% of sales in 2004 and 35.4% of sales in 2005. Depreciation expense also increased. With all of the different expense categories increasing and some increasing faster than sales, the company's margins have been steadily eroded in the past three years.
In the past three years, DCI has seen volatility in its asset level, which increased 11.1% in 2004 but then shrunk 4.9% in 2005. During this period, there was also fluctuation in total liabilities, which increased 35.9% in 2004 but then fell 18.8% in 2005. During this period, there was also volatility in the shareholder's equity. This decreased in 2004 by 4.2% but then increased 7.1% in 2005. With specific respect to liquidity, the company took…
The vertical analysis shows that the firm is liquid with a current ratio of 3.11, compared with 2.12 last year. The cash ratio is 0.26, compared with 0.19 the year previous. The debt-to-equity ratio this year is 0.67, compared with 0.88 the year previous. All signs point to the company improving its balance sheet in the past year, with a short-term event in 2004 having caused the balance sheet to deteriorate.
The balance sheet shows that DCI expanded during 2004, adding plants and equipment, and debt to pay for that. This has also caused an expansion of the firm's cost structure, but has yet to translate in a meaningful way to the revenue line. The company's revenues are growing slowly, so the question must be asked as to the nature of the project that the company spent its money on. It is encouraging, however, the DCI made improvements to its balance sheet in 2005 to restore it to its previous level of health.
The changes to the vertical analysis of the income statement that require further explanation refer mainly to the increase in the company's expenses at a point in time when the company is supposed to be getting smaller. DCI has seen some increase in revenue, but only incrementally, while its expenses are increasing at a more rapid pace. It is also worth asking why the depreciation expense increased in 2005 at a point in time when the company got smaller. In general, however, the vertical analysis raises red flags about performance rather than accounting procedure.
Balance Sheet Financial analysis is critical to determining the intrinsic value of a company. Analysts, hedge funds, institutional investors and retail investors alike all use various forms of information to determine a fair price to pay for a security. This information is generally acquired through the financial statements of the particular company being researched. In addition to the many forms of information gathering within the market, there are also many philosophies
Balance Sheet a) Using the 2012 Annual Report, which reflects the fiscal year ended December 31, 2012, Facebook lists short-term liabilities on its balance sheet of $1.052 billion, split between several categories. The largest of these is the accrued expenses, followed by the capital lease obligations. The long-term debt on the company's balance sheet is $1.50 billion with the total long-term liabilities being $2.296 billion. b) The market capitalization of Facebook is
Balance Sheet Question/Statement: Select either the balance sheet or income statement and explain how the use of it may be applied to your everyday life. The balance sheet may be applied to everyday life in that it can be used to assess past performance, as well as to plan for future undertakings. If, for example, an individual used one's birthday as the balance sheet statement date, then the balance sheet would show
Balance Sheet Adjustments The updated balance sheet for Module 2 is as follows: Balance Sheet Assets Current Assets Cash Accounts Receivable Inventory Property, Plant, and Equipment Equipment Total Assets Liabilities and Stockholder's Equity Current Liabilities Accounts Payable Long-Term Debt Long-Term Debt Total Liabilities Stockholder's Equity Common Stock Paid In Capital Retained Earnings Total Stockholder's Equity Total Liabilities & Stockholder's Equity Because the customer did not commit to the purchase, the Sales account would have been credited the 45,500 and the inventory account debited 45,500 to correct the original transaction. The computation of the
Capital structure decisions can be deliberate as well, yet an analyst without knowledge of the firm's intentions could make an entirely different determination about the validity of the firm's capital structure if based only on the balance sheet. At a minimum, the income statement is also required and in most cases much more information than that is needed to make an accurate assessment of the firm's financial condition (Kennon,
The attention on cases of impairment has generally been reduced, but this is expected to increase with the more emphasis placed on financial analysis and audits, a need generated by the contemporaneous economic crisis (Wayman, 2009). As an addition then, there have been developed complementary regulations. IFRS 3 for instance, states that while amortisation tests will not be conducted, impairments tests will still be performed. IAS 39 states that