Prepare common size balance sheets to be used

Assignment Help Financial Accounting

Reference no: EM13940905

PREPARING COMMON SIZE STATEMENTS

The financial statements for Matt's Hats, Inc., appear below and on the next page.

Matt's Hats, Inc. Income Statement
	Year Ended December, 31,
(In thousands, except per share data)	2009	2008	2007
Revenues	$4,102,721	$3,652,412	$3,178,569
Costs and expenses:
Cost of goods sold	$2,256,236	$2,234,985	$1,952,123
Selling and administrative	927,412	653,986	598,236
Interest	23,974	32,596	31,853
Other expenses (income)	1,925	2,254	(102)
Total costs and expenses	$3,209,547	$2,923,821	$2,582,110
Income before income taxes	$ 893,174	$ 728,591	$ 596,459
Income taxes	247,692	183,456	163,524
Net income	$ 645,482	$ 545,135	$ 432,935

Matt's Hats, Inc. Balance Sheets (In thousands)
ASSETS	December, 31
	2009	2008
Current assets: Cash and equivalents Accounts receivable, less allowance for doubtful accounts of $20,568 and $18,322 Inventories Deferred income taxes Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Goodwill Other assets Total assets	$ 301,695	$ 269,648
	670,469	604,236
	601,396	469,582
	23,415	24,397
	43,624	36,478
	$1,640,599	$1,404,341
	$ 583,152	$ 501,239
	206,452	148,231
	$ 376,700	$ 353,008
	162,325	127,695
	29,158	23,598
	$2,208,782	$1,908,642

liabilities and stockholders' equity
Current liabilitis
Current portion of long-term debt	$ 63,169	$ 5,665
Notes payable	112,596	110,423
Accounts payable	128,696	139,364
Accrued liabilities	143,874	133,569
Income taxes payable	23,541	38,972
Total current liabilities	$ 471,876	$ 427,993
Long-term debt	16,254	83,456
Noncurrent deferred income taxes	33,489	31,238
Other noncurrent liabilities	46,685	27,434
Commitments and contingencies	-	-
Redeemable preferred stock	200	200
Total liabilities	$ 568,504	$ 570,321
Shareholders' equity: Common stock at stated value: Class A convertible-27,723 and
25,832 shares outstanding Class B-49,756 and 47,652 shares outstanding	$ 164 3,152	$ 175 3,120
Capital in excess of stated value	110,596	96,546
Treasury stock (common at cost)	(8,741)	(7,859)
Retained earnings	1,535,107	1,246,339
Total stockholders' equity	$1,640,278	$1,338,321
Total liabilities and stockholders' equity	$2,208,782	$1,908,642

Required:

1. Prepare common income statements to be used for horizontal analysis for Matt's Hats for 2007 to 2009.

2. Indicate why Matt's net income increased between 2007 and 2009.

3. Prepare common size balance sheets to be used for vertical analysis for 2009 and 2008.

4. Determine whether the proportion of dollars invested in the various categories of assets has changed significantly between 2008 and 2009.

5. Determine whether the proportion of capital raised from the various liability categories and common shareholders' equity has changed significantly between 2008 and 2009.

6. Indicate how you would describe Matt's performance and financial position?

Reference no: EM13940905

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