Question

13. Three companies report the following horizontal analyses: Company A Company B Company C Account receivable 1.1% 14.1% 2.1% Inventory 10.4 (1.7) 6.4 Sales (3.2) 1.5 8.6 Total assets 1.4 (2.5) 7.0 For each company, describe what the percentages reveal about the company. Which of the companies would you be most concerned about? Answer:

Answer 1

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Answer: Company A company a showed an increase in accounts receivable, inventory and total assets but a decrease in sales. This reveals that the excess inventory is due to a decrease in sales. Aditionally, if sales decrease you would expect a decrease in accounts receivable as well; however, this is not the case and therefore the company should concerned at collecting their accounts receivable. Company B : company B's accounts receivable increased dramatically and this is partially driven by the increase in sales; however they should pay attention to the collectibility of accounts receivable Inventory decreased while sales increased the company should be needs to make sure they have enough inventory on hand to maximize their sales. Company : company is sales increased significantly this Paplains the increase in accounts receivables, inventory, and total assets. This indicates good performance and planning by management .. LENE concern & Company A's analysis presents They experienced the only decrease appears they are experiencing excess in collectible accounts receivable. the most concern. in sales, and it inventory and potential