Table 2.

1: JSC Foods Corporation

Common-Size Statements of Profit or Loss

For the Years Ending December 31, 2014-2010

2014 2013 2012 2011 2010

Net Sales 100% 100% 100% 100% 100%
Cost of Sales 80% 80% 81% 82% 83%
Gross Profit 20% 20% 19% 18% 17%
Operating Expenses 12% 13% 13% 13% 13%
Operating Income 8% 7% 7% 5% 4%
Interest Expense 0% 1% 1% 1% 1%
Income before Taxes 7% 6% 6% 4% 3%
Taxes 2% 2% 2% 1% 1%
Net Income 5% 4% 4% 3% 2%
 Table 2.2: JSC Foods Corporation

Common-Size Statements of Financial Position

December 31, 2014-2010

2014 2013 2012 2011 2010

Assets
Current Assets
Cash 5% 5% 5% 5% 5%
Receivables 10% 9% 10% 9% 8%
Inventories 22% 22% 22% 20% 20%
Other Current Assets 5% 5% 6% 4% 6%
Total Current Assets 42% 41% 42% 38% 39%
Noncurrent Assets
Property, Plant, and Equipment, Net 55% 55% 53% 57% 56%
Other Noncurrent Assets 4% 4% 5% 5% 5%
Total Noncurrent Assets 58% 59% 58% 62% 61%
Total Assets 100% 100% 100% 100% 100%

Liabilities and Equity

Current Liabilities
Trade Payables 23% 23% 24% 20% 17%
Income Taxes Payable 2% 1% 2% 1% 1%
Current Portion of Long-term Debt 10% 12% 6% 12% 12%
Other Current Liabilities
Total Current Liabilities 35% 37% 32% 33% 30%
Noncurrent Liabilities
Long-term Debt, Net of Current Portion 9% 6% 0% 6% 18%
Total Liabilities 44% 43% 32% 39% 47%
Stockholders’ Equity
Capital Stock 36% 39% 46% 49% 47%
Retained Earnings 20% 19% 22% 12% 5%
Total Stockholders’ Equity 56% 57% 68% 61% 53%
Total Liabilities and Stockholders’ Equity 100% 100% 100% 100% 100%
 Horizontal Analysis
- Horizontal or trend analysis is a financial statement analysis technique
that shows changes in financial statement accounts over time.
Changes can be shown both in absolute peso amounts and in
percentage.

To compute for the change, simply get the difference from one period to
another. The earlier period is used as the base period. To illustrate, let us
compute the change in the sales of JSC Foods Corporation from 2013-2014.

Peso Change = (Sales2014 – Sales2013)

Peso Change = 52 501 085 – 47 345 223

Peso Change = 5 155 862

% Change = ((Sales2014 – Sales2013) / Sales2013) x 100%

% Change = (5 155 862/47 345 223) x 100%

These changes for the different accounts are important to identify

trends. This horizontal analysis can be done for the different accounts from
the statement of financial position, statement of profit or loss, and statement
of cash flows.

Presented in Table 2.3 are the changes in the statement of profit or

loss accounts of JSC Foods Corporation from 2011 to 2014 in peso amounts
while table 2.4 shows the changes in the statements of profit or loss accounts
in percent.
 Table 2.3: JSC Foods Corporation

Annual Changes in the Statement of Profit or Loss Accounts in Peso

From 2011 to 2014

2014 2013 2012 2011

Net Sales 5 155 862 5 170 940 3 834 026 3 003 615
Cost of Sales 3 966 102 4 008 454 2 541 163 2 109 598
Gross Profit 1 189 760 1 162 486 1 292 863 894 017
Operating Expenses 300 855 803 183 466 898 421 301
Operating Income 888 905 359 303 825 965 472 716
Interest Expense - - (200 000) 150 000
Income before Taxes 888 905 359 303 1 025 965 322 716
Taxes 266 672 107 791 307 789 96 815
Net Income 622 234 251 512 718 175 225 901

Table 2.4: JSC Foods Corporation

Annual Changes in the Statement of Profit or Loss Accounts in %

From 2011 to 2014

2014 2013 2012 2011

Net Sales 11% 12% 10% 8%
Cost of Sales 10% 12% 8% 7%
Gross Profit 13% 14% 19% 15%
Operating Expenses 5% 15% 9% 9%
Operating Income 28% 13% 42% 31%
Interest Expense 0% 0% -44% 50%
Income before Taxes 31% 14% 67% 27%
Taxes 31% 14% 67% 27%
Net Income 31% 14% 67% 27%
 Exhibit 2.1: JSC Foods Corporation
Statements of Profit or Loss
For the Years Ending December 31, 2010-2014

2014 2013 2012 2011 2010

Net Sales 52 501 085 47 345 223 42 174 283 38 340 257 35 336 643
Cost of Sales 41 954 730 37 988 628 33 980 174 31 439 011 29 329 413
Gross Profit 10 546 355 9 356 595 8 194 109 6 901 246 6 007 229
Operating Expenses 6 497 659 6 196 804 5 393 621 4 926 723 4 505 422
Operating Income 4 048 696 3 159 791 2 800 488 1 974 523 1 501 807
Interest Expense 250 000 250 000 250 000 450 000 300 000
Income before Taxes 3 798 696 2 909 791 2 550 488 1 524 523 1 201 807
Taxes 1 139 609 872 937 765 146 457 357 360 542
Net Income 2 659 087 2 036 854 1 785 342 1 067 166 841 265
 Exhibit 2.1: JSC Foods Corporation
Statements of Financial Position
December 31, 2010-2014

2014 2013 2012 2011 2010

Assets
Current Assets
Cash 1 062 527 996 904 777 415 766 805 883 416
Trade Receivables 2 300 500 1 921 799 1 722 513 1 454 426 1 396 639
Inventories 4 849 304 4 499 998 3 797 668 3 293 030 3 351 933
Other Current Assets 1 050 00 983 746 984 786 735 608 998 763
9 262 331 8 402 447 7 282 382 6 249 869 6 630 751
Noncurrent Assets
Property, Plant, and Equipment, Net 12 200 000 11 300 000 9 050 000 9 350 000 9 500 000
Other Noncurrent Assets 835 689 925 681 896 842 876 235 827 490
13 035 689 12 225 681 9 946 842 10 226 235 10 327 490
Total Assets 22 298 020 20 628 128 17 229 224 16 476 104 16 958 241

Liabilities and Equity

Current Liabilities
Trade Payables 5 050 810 4 746 252 4 137 815 3 298 699 2 874 911
Income Taxes Payable 433 051 283 705 267 801 149 441 115 330
Current Portion of Long-term Debt 2 250 000 2 500 000 1 000 000 2 000 000 2 000 000
Other Current Liabilities 85 600 28 700 40 990 30 688 37 890
7 819 461 7 558 657 5 446 606 5 478 828 5 028 131
Noncurrent Liabilities
Long-term Debt, Net of Current Portion 2 000 000 1 250 000 1 000 000 3 000 000
Total Liabilities 9 819 461 8 808 657 5 446 606 6 478 828 8 028 131
Stockholders’ Equity
Capital Stock 8 000 000 8 000 000 8 000 000 8 000 000 8 000 000
Retained Earnings 4 478 559 3 819 472 3 782 618 1 997 276 930 110
Total Stockholders’ Equity 12 478 559 11 819 472 11 782 618 9 997 276 8 930 110
Total Liabilities and Stockholders’ 22 298 020 20 628 128 17 229 224 16 476 104 16 958 241
Equity
 Liquidity ratio
A. Current Ratio
Current Ratio = Current Assets / Current Liabilities
Current Ratio = 9 262 331 / 7 819 461
Current Ratio = 1.18
B. Acid-Test Ratio or Quick Asset Ratio
Quick Asset Ratio = (Current Assets – Inventories) /Current Liabilities
Quick Asset Ratio = (1 062 527 + 2 300 500) / 7 819 461
Quick Asset Ratio = 0.43
C. Cash Ratio
Cash Ratio = Cash + Cash Equivalents / Current Liabilities
Cash Ratio = 9 262 331 / 7 819 461
Cash Ratio = 1.18
D. Networking Capital
Networking Capital = Current Assets – Current Liabilities
Networking Capital = 9 262 331 – 7 819 461
Networking Capital = 1 442 870
 Capital Structure Ratio
A. Debt Ratio
Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = 9 819 461 / 22 298 020
Debt Ratio = 0.44
B. Debt Equity Ratio
Debt to Equity Ratio = Total Liabilities / Total Stockholders’ Equity
Debt to Equity Ratio = 9 819 461 / 12 478 559
Debt to Equity Ratio = 0.79
C. Interest Coverage Ratio
Interest Coverage Ratio = EBIT / Interest Expense
Interest Coverage Ratio = 4 048 696 / 250 000
Interest Coverage Ratio = 16.19
 Efficiency Ratio
A. Total Asset Turnover Ratio
Asset Turnover Ratio = Sales / Total Assets
 Asset Turnover Ratio = 52 501 085 / 22 298 020
Asset Turnover Ratio = 2.35
B. Fixed Asset Turnover Ratio
Fixed Asset Turnover Ratio = Sales / PPE
Fixed Asset Turnover Ratio = 52 501 085 / 12 200 000
Fixed Asset Turnover Ratio = 4.30
C. Accounts Receivable Turnover Ratio
Accounts Receivable Turnover Ratio = Sales / Accounts Receivable
Accounts Receivable Turnover Ratio = 52 501 085 / 2 300 500
Accounts Receivable Turnover Ratio = 22.82
D. Average Collection Period
Average Collection Period = 360 / 22.82
Average Collection Period = 15.78 or 16 days
E. Inventory Turnover Ratio
Inventory Turnover Ratio = Cost of Sales / Inventories
Inventory Turnover Ratio = 41 954 730 / 4 849 304
Inventory Turnover Ratio = 8.65
F. Days’ in Inventories
Days’ in Inventories = 360 / Inventory Turnover Ratio
Days’ in Inventories = 360 / 8.65
Days’ in Inventories = 41.62 or 42 days
G. Accounts Payable Turnover Ratio
Accounts Payable Turnover Ratio = Cost of Sales / Trade Accounts
Payable
Accounts Payable Turnover Ratio = 41 954 730 / 5 050 810
Accounts Payable Turnover Ratio = 8.31
H. Days’ Payable
Days’ Payable = 360 / Accounts Payable Turnover Ratio
Days’ Payable = 43.32 or 43 days
I. Operating Cycle
Operating Cycle = Days’ Inventories + Days’ Receivable
Operating Cycle = 42 + 16
Operating Cycle = 58 days
J. Cash Conversion Cycle
Cash Conversion Cycle = Operating Cycle – Days’ Payable
 Cash Conversion Cycle = 58 days – 43 days
Cash Conversion Cycle = 15 days
 Profitability
A. Gross Profit Margin
Gross Profit Margin = (Gross Profit / Sales) x 100%
Gross Profit Margin = (10 546 355 / 52 501 085) x 100%
Gross Profit Margin = 20.09%
B. Operating Profit Margin
Operating Profit Margin = (Operating Income / Sales) x 100%
Operating Profit Margin = (4 048 696 / 52 501 085) x 100%
Operating Profit Margin = 7.71%
C. Net Profit Margin
Net Profit Margin = (Net Income / Sales) x 100%
Net Profit Margin = (2 659 087 / 52 501 085) x 100%
Net Profit Margin = 5.06%
D. Return on Assets
ROA = (Operating Income / Total Assets) x 100%
ROA = (4 048 696 / 22 298 020) x 100%
ROA = 18.16%
E. Return on Equity
ROE = (Net Income / Stockholders’ Equity) x 100%
ROE = (2 659 087 / 12 478 559) x 100%
ROE = 21.31%