BACC103 VERTICAL ANALYSIS

The statement of financial position and comparative statements of profit or loss of Entity A are shown
below:

Entity A
Statements of Financial Position
As of December 31, 20x1

ASSETS

Cash and cash equivalents ₱159,600

Trade and other receivables 320,400

Inventory 306,000

Prepaid assets 48,000

Total current assets 834,000

Property, plant & equipment 1,886,000

Total noncurrent assets 1,886,000

TOTAL ASSETS ₱2,720,000

LIABILITIES

Trade and other payables ₱556,200

Total current liabilities 556,200

Notes Payable 1,120,000

Total noncurrent liabilities 1,120,000

TOTAL LIABILITIES 1,676,200

BACC103 VERTICAL ANALYSIS

EQUITY

Owner’s capital 1,043,800

TOTAL LIABILITIES & EQUITY ₱2,720,000

Entity A
Statement of profit or loss
For the years ended December 31, 20x1

Sales ₱2,296,000

Cost of slaes (1,010,240)

GROSS PROFIT 1,285,760

Salaries expense (943,400)

Depreciation expense (66,010)

Bad debts expense (16,020)

Interest expense (112,000)

PROFIT FOR THE YEAR ₱148,330

Requirements:
a. Perform a vertical analysis of the financial statements shown above.
b. Answer the TRUE OR FALSE questions below.

1. Entity A has more current resources than concurrent.

2. A larger portion of Entity A’s resources pertain to the owner.
3. Entity A uses leverage to finance its operations more than equity financing.
4. After cost of sales, the next largest expenditure of Entity A pertains to its employees.
5. Assuming all other income and expenses remain constant, if Entity A employs additional
employees, Entity A will probably incur loss.