Homework Answers
COMPONENT PERCENTAGE is nothing but a vertical analysis of
INCOME STATEMENT which uses SALES as base and shows us what
percentage of different components of INCOME STATEMENT takes of
total SALES of the company for the given financial year. Using the
given statement, we get the following COMPONENT PERCENTAGE
SITUATION:
| Particulars | Amount | Formula | Component Percentage |
| SALES | 560000 | Used as Base | 100% |
| Cost of Sales | (340000) | (340000/560000)X100 | 60.71% |
| Gross Profit | $220000 | (220000/560000) X100 | 39.29% |
| Operating expenses | (160000) | (160000/560000)X100 | 28.57% |
| Net Income | $60000 | (60000/560000)X 100 | 10.72% |
From the above table we see that component percentage of
each item is calculated to find what percentage of TOTAL SALES does
it occupy. SALES itself is 100% from which if we deduct all COST OF
SALES we get GROSS PROFIT. Another thing to notice in component
percentage is that GROSS PROFIT and COST OF SALES are a part of
TOTAL SALES and their component percentage together will always be
100 % (60.71% + 39.29%)
Similarly OPERATING EXPENSES when deducted from Gross profit gives
us NET INCOME whose each component percentage shows how much
percentage of TOTAL SALES do they take. Also since both OPERATING
EXPENSES and NET INCOME are a part of GROSS PROFIT, therefore their
component percentage's summation will be equal to GROSS PROFIT's
component summation = [(28.57% + 10.72%) = 39.29%]
TOTAL Assets = $1000000
Current Assets = $470000
TOTAL Liabilities = $600000
Current Liabilities = $267000
Working capital is a part of company's finance which shows us
what part of short term Assets (Current Assets) of company are
remaining after we have met all of it's short term Liabilities
(Current Liabilities)
When the company has positive working capital that means it can
satisfy it's current obligations and also meet it's day to day
expenses. Thus a positive working capital is always
preferable
Working Capital = Current Assets - Current
Liabilities
=> $470000 - $267000
Thus working capital of company is $203000
Current ratio is a ratio which is used to measure firm's
liquidity position and whether it can meet it's current liabilities
in a given financial year or not.
Current ratio = Current Assets / Current Liabilities
=> $470000 / $267000
Thus Current ratio for the financial year of company is
1.76 :
1
This means that firm's Current Assets is 1.76 times of it's
current liabilities and it can easily meet it's obligations. A
Current ratio less that '1' means that Current Liabilities is more
than Current Assets and such situation is not preferable.
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Help me with the cash flow statement using the indirect method
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Balance Sheet 2012 &
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Your answer is partially correct. Try again. Compute the missing information labeled a-q. (Round percentages and...
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Problem 13-2A Ratios, common-size statements, and trend percents LO P1, P2, P3 The following information applies to the questions clsplayed below) Selected comparative financial statements of Korbin Company follow KORBIN COMPANY Comparative Income Statements For Years Ended December 31, 2017, 2016, and 2015 2017 2016 2015 Sales $432,442 $331,286 $229,900 Cost of goods sold 260,330 207,054 147, 136 Gross profit 172,112 124,232 82,764 Selling expenses 61, 407 45,717 30,347 Administrative expenses 38,920 29,153 19,082 Total expenses 100, 327 74,870 49,429...
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