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Question 1 - Selected financial information for DMA Corp. for a six-year period follows:
(Amounts in thousands)
2020
2019
2018
2017
2016
2015
Net sales
$1,806
$1,757
$1,606
$1,704
$1,638
$1,588
Net income
144
120
89
126
100
96
Ending common shareholders' equity
940
860
772
684
628
600
Required -
1. Prepare a horizontal analysis to compare 2020 to 2019. Which accounts increased the most?
2. Compute trend percentages for 2016 through 2020, using 2015 as the base year.
3. From the above data, what can we infer about expenses from 2015 through 2020?
Question 2 - The president of Mackey Car Parts, Inc. has asked you to compare the company's profit performance and financial position with the averages for the industry. The accounting office has given you the company's income statement and balance sheet, as well as the industry average data for competitors:
Mackey Car Parts, Inc. Income Statement Compared with Industry Average For the Year Ended December 31, 2020
Mackey
Industry
Car Parts
Average
$778,000
100.00%
Cost of goods sold
522,816
65.8
Gross margin
255,184
34.2
Operating expenses
161,046
19.7
Operating income
94,138
14.5
Other expenses
4,668
0.4
$89,470
14.10%
Mackey Car Parts, Inc. Balance Sheet Compared with Industry Average 31-Dec-20
Current assets
$325,440
70.90%
Property, plant, and equipment
120,960
23.6
Intangible assets, Net
8,640
0.8
Other assets
24,960
4.7
Total assets
$480,000
Current liabilities
$222,720
48.10%
Long-term liabilities
107,520
16.6
Total liabilities
330,240
64.7
Shareholders' equity
149,760
35.3
Total liabilities and shareholders' equity
1. Make a vertical analysis for Mackey for both its income statement and balance sheet.
2. Compare the company's gross margin percentage (gross margin as a percent of net sales) with the average for the industry. Comment on their investment in assets compared to the industry information shown.
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