Assignment Results ACG 3073 Copy Of Managerial Accounting

Assignment Resultsacg 3073 Copy Of Managerial Accounting Acg 3073chap

Selected comparative financial statements of Bennington Company are provided, including income statements and balance sheets for the years ending December 31, 2010, 2011, and 2012. The assignment requires computing the current ratio for each year, expressing income statement data in common-size percentages, and expressing balance sheet data in trend percentages with 2010 as the base year. These analyses help in understanding the company's liquidity, profitability, and financial stability over time.

Paper For Above instruction

The analysis of financial statements is a vital aspect of managerial accounting, providing insights into a company's financial health and operational efficiency. The given data for Bennington Company includes comparative income statements and balance sheets spanning three consecutive years, allowing for various analytical assessments such as liquidity ratios, vertical analysis, and trend analysis.

Calculation of Current Ratios

The current ratio is a measure of a company's ability to meet its short-term obligations, calculated by dividing current assets by current liabilities. For Bennington Company, the data used for this calculation are from the balance sheets. In 2012, the current assets were valued at $48,691, and current liabilities were $20,516; thus, the current ratio is:

2012: $48,691 / $20,516 ≈ 2.4:1

In 2011, current assets were $38,095 with current liabilities of $20,331, leading to a ratio of approximately 1.9:1.

For 2010, current assets were $50,924 and current liabilities $19,784, resulting in a ratio of about 2.6:1.

These ratios indicate that the company's liquidity position improved from 2011 to 2012, with a slight decrease in 2011 compared to 2010. A current ratio above 2:1 is generally viewed as a sign of good short-term financial health, which is reflected in Bennington's ratios for 2012 and 2010.

Vertical Analysis of Income Statement

Vertical analysis expresses each line item as a percentage of total sales, facilitating comparisons across years regardless of scale. Based on the income statements, sales for 2012 amounted to $538,907; the cost of goods sold was approximately 42.00% of sales, which translates to about $226,660. Similarly, gross profit is about 58%, calculated as ($538,907 - $226,660) / $538,907.

Selling expenses accounted for approximately 14.20%, administrative expenses about 9.0%, and total expenses roughly 42.00%. Income before taxes was set at approximately 16.6%, and net income about 13.5% of sales. When comparing 2012 to previous years, trends in expense proportions and profit margins can be evaluated, revealing operational efficiency or areas requiring cost control.

Trend Analysis of Balance Sheet Data

Trend analysis involves calculating percentages relative to a base year—in this case, 2010—to assess growth or decline over time. For assets, current assets increased from $50,924 in 2010 to $48,691 in 2012, representing a trend percentage of approximately 95.6%. Conversely, total assets grew from $113,051 in 2010 to $140,522 in 2012, indicating an approximate 124.4% increase. Most components of the balance sheet can be analyzed similarly, considering their changes relative to the 2010 figures.

Liabilities and equity components such as retained earnings, common stock, and contributed capital also show growth patterns in line with the overall asset expansion. Analyzing these trend percentages reveals whether the company’s growth is driven by retained earnings, new investments, or increased liabilities. For Bennington Company, the trend analysis suggests a sustained growth path in assets and equity, reflecting operational expansion over the analyzed period.

Implications of Financial Analysis

The current ratio analysis suggests that Bennington Company maintained a strong liquidity position throughout the period, particularly in 2012. The vertical analysis indicates a consistent gross profit margin, although operating expenses as a percentage of sales could be scrutinized for efficiency improvements. The trend analysis indicates healthy growth, but it warrants careful monitoring to ensure that asset growth aligns with profitability and liquidity health.

Managing liquidity, controlling costs, and ensuring sustainable growth are critical for future financial stability. These analyses collectively enable managers and investors to make informed decisions regarding operations, investments, and credit policies, supporting strategic planning and performance evaluation.

Conclusion

In sum, the financial data for Bennington Company show a positive trajectory in terms of liquidity, profitability, and asset growth. The current ratio figures indicate a comfortable liquidity position, while the vertical and trend analyses help to understand operational efficiencies and growth dynamics. Continued monitoring and analysis of these ratios and metrics are vital for maintaining financial robustness and supporting long-term strategic goals.

References

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