Open The Excel Spreadsheet Provided. Prepare A Vertical Anal

Open The Excel Spreadsheet Providedprepare A Vertical Analysis Of Br

Open the Excel spreadsheet provided. Prepare a vertical analysis of Bridgford’s income statement. Enter the percentages in columns C, E, G, I, and K. For additional information regarding vertical analysis, please review the following. Vertical Analysis 2. Prepare a projected income statement assuming sales increase by 3% in 2020 and 6% in 2021. Average your vertical analysis percentages for each income statement account and enter the results in column L, rows 5 - 11. Example: Add columns C, E, G, I, and K and divide by 5. (64.07+60.58+63.17+67.57+67.34)/5=64.55%. Column L, row 5 = 64.55%. Enter your projected sales number in columns M & N, row 4. Columns M and N: Multiply projected sales by the average percentage for each income statement account. 3. Ratio Computations. Use Excel formulas to calculate financial ratios listed with the income statement and balance sheet tabs. Calculate ratios for seven years (i.e.).

Do not prepare ratios that require data from the 2020 and 2021 balance sheet. In this case, “N/A” is entered in the appropriate cell. For additional information regarding ratios, please review the following.

Paper For Above instruction

The assignment requires performing a vertical analysis of Bridgford’s income statement as provided in an Excel spreadsheet. Vertical analysis involves expressing each line item as a percentage of total sales, allowing for comparison across different periods or companies regardless of size differences. This process provides insights into the relative proportions of income statement components, highlighting trends and areas of concern over multiple years.

First, the percentages for each income statement account are to be entered into specific columns (C, E, G, I, and K) across different years. These columns probably correspond to different fiscal years for which data is available. To perform the vertical analysis, sum the percentages across these columns for each account and calculate the average, placing this in column L for row 5 to row 11. This average reflects the typical proportion of each account relative to sales over the examined period.

Next, the assignment involves projecting the income statement for future years, specifically for 2020 and 2021. The projected sales figures for these years are given or need to be entered in columns M and N, row 4. Using the averaged percentages, the projected sales values for each account are calculated by multiplying the projected sales amount by the corresponding average percentage. This step forecasts the expected dollar amounts for each income statement line item based on the anticipated increase in sales.

Following the projection, the final part involves calculating financial ratios using Excel formulas based on mapped income statement and balance sheet data. Ratios such as gross margin, net profit margin, return on assets, and others are to be computed for seven years to analyze trends and performance over time. It’s important to note that ratios requiring balance sheet data from 2020 or 2021 should be marked as “N/A” because that data is either unavailable or outside the scope of this analysis.

Overall, this assignment aims to deepen the understanding of financial statement analysis through vertical analysis, sales forecasting, and ratio computation—providing a comprehensive view of Bridgford’s financial health and operational efficiency over multiple years.

Answer to the Assignment

Introduction

Vertical analysis is a fundamental technique in financial statement analysis that involves expressing each line item as a percentage of a base figure, typically total sales for income statements. This method allows for the comparison of financial data across different periods or against industry standards, irrespective of company size. In this paper, we will conduct a vertical analysis of Bridgford’s income statement based on the provided Excel data. Furthermore, we will project future income statements assuming sales growth of 3% in 2020 and 6% in 2021, compute average percentages, and utilize these to forecast income statement figures. Lastly, we will calculate key financial ratios to evaluate Bridgford’s financial health comprehensively across multiple years.

Vertical Analysis of Bridgford's Income Statement

The process begins with calculating each line item as a percentage of total sales for each year available in the dataset. This normalization facilitates comparison regardless of the absolute size of revenues. For example, if the cost of goods sold (COGS) was $1 million and total sales were $5 million, COGS would represent 20% of sales for that year. Repeating this process across all years and line items, we enter the obtained percentages into columns C, E, G, I, and K of the spreadsheet.

Once these percentages are recorded, we compute the average percentage for each income statement account across the given years. This averaging smooths out anomalies and gives a stable basis for future projections. For instance, if the gross profit margin percentages over five years are 40%, 42%, 41%, 43%, and 42%, the average is 41.6%. This is entered into column L for the respective account.

Projection of Income Statement for 2020 and 2021

Using the average vertical analysis percentages from column L, we project the income statement for the upcoming years based on anticipated sales increases. For 2020, sales are projected to increase by 3%, and for 2021, by 6%. The projected sales figures are entered into columns M and N, row 4. The projected dollar amounts for each income statement account are derived by multiplying these projected sales figures by the respective average percentages.

For example, if the current sales are $10 million, then the projected sales for 2020 would be $10 million 1.03 = $10.3 million, and for 2021, $10 million 1.06 = $10.6 million. If the average gross margin percentage is 41.6%, then the projected gross profit for 2020 would be $10.3 million * 0.416 ≈ $4.29 million, and similarly for 2021.

Financial Ratio Calculations

Financial ratios provide insights into the company's profitability, efficiency, liquidity, and solvency. Using Excel formulas, ratios such as gross margin, net profit margin, return on assets (ROA), return on equity (ROE), current ratio, quick ratio, debt-to-assets ratio, and other relevant metrics are calculated for each year. These ratios help to identify trends over the period analyzed and to compare Bridgford’s performance against industry benchmarks.

Certain ratios require specific balance sheet data, such as assets, liabilities, and equity. For years where this data from 2020 and 2021 is unavailable, “N/A” is entered to indicate the data is not applicable or not provided. Accurate ratio analysis ensures a comprehensive view of financial health, highlighting areas of strength and potential concern.

Discussion and Analysis

The vertical analysis and future projections offer valuable insights into Bridgford’s operational efficiency and financial stability. A consistent gross profit margin indicates stable production costs relative to sales, while variances in net profit margin can reflect changes in operational expenses or other non-operating factors. The trend in ratios like ROA and ROE illustrate how effectively the company utilizes its assets and equity to generate profit. Understanding this data over multiple years helps stakeholders make informed decisions regarding investments, management strategies, and financial planning.

Conclusion

This comprehensive analysis underscores the importance of vertical analysis, sales forecasting, and ratio computation in understanding a company's financial position. By meticulously analyzing past performance and projecting future outcomes, stakeholders can assess the company's stability and growth potential. For Bridgford, the analysis suggests key areas to monitor and improve, ensuring strategic decisions are supported by robust financial insights.

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