Prepare a comparative balance sheet, income statement, and statement of cash flows|Quick homework help

Michelle’s Post

Prepare a comparative balance sheet, income statement, and statement of cash flows, and perform a horizontal analysis of the company’s balance sheet, income statement, and statement of cash flows for the most recent 2 years. Identify at least one significant change (increase or decrease) from one year to the next in a balance sheet account, income statement account, and statement of cash flows account.

. Apple Company Horizontal Analysis of the Balance Sheets and Income Statement

December

25, 2021

September

25, 2021

Percentage

change

Balance

sheet $ 000,000 $ 000,000 (%)

Total Current

Assets 224,748 191,835 17.14

Total Assets 365,725 338,516 8.04

Total Current

Liabilities 129,525 108,856 18.97

Total

Liabilities 199,664 172,829 15.50

Total

Shareholders’

Equity

166,061 165,687 0.23

Income

Statement

Net Sales 123,857 83,357 48.51

Operating

Expenses 14,771 12,426 18.87

Operating

Income 29,428 17,710 66.35

Net Income 34,193 21,744 57.19

 

 

 

AAPL’s financial statements indicate that the company can create more revenue and raise its profits during this period. However, AAPL took on more liabilities to finance its growth initiatives, which may have impacted its financial position in the long term.

Identify the causes of the change in each of these accounts.

The horizontal analysis shows Apple’s (APPL) balance sheet and income statement changes between December 25, 2021, and September 25, 2021. To start with the balance sheet, there was a slight increase in total current and total assets by 17.14% and 8.04%, respectively. This shows that AAPL was able to earn more revenue in this period, which may increase its assets. There is a significant increase in total current liabilities by 18.97%, possibly due to the increase in expenses or the need to finance other growth initiatives. Total liabilities increased by 15.50%, demonstrates that AAPL could have taken more debt to finance its activities. Subsequently, there is a slight increase of about 0.23% for the total shareholders’ equity, which translates that AAPL did not create much-retained earnings or may have repurchased some of its shares.

In the income statement, there is an increase in net sales by 48.51%, showing that AAPL raised its revenue during this period. The operating expenses increased by 18.87%, which may be due to research and/or development or through marketing investments. Thus, operating income increased by 66.35%, showing that AAPL created more income from its normal operations. Finally, net income increased by 57.19%, showing that AAPL generated more profit during this period.

Discuss the implications of each of these account changes, and your assessment of the company based on these changes. Do these changes reflect positively or negatively on the company, and what is your assessment of the outlook for the company?

Apple’s financial statements indicate that the company can create more revenue and raise its profits during this period. However, they took on more liabilities to finance its growth initiatives, which may have impacted its financial position in the long term. Apple is in good financial health with a compelling performance in revenue growth, reasonable expenses, and a low ratio of net interest income expense to income from the operations.

References: Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.). Retrieved from https://www.cengage.comLinks to an external site. https://investor.apple.com/investor-relations/default.aspxLinks to an external site.

 

 

 

Victoria’s post One significant change in the horizontal analysis of Medtronic for fiscal years 2020 and 2021 on the balance sheet was that the current debt obligations were reduced by nearly 100%. The current debt obligations in 2020 were $2,776M and dropped to only $11M the following year. According to the annual report, this is due to two-year senior notes hitting their expiration. As a result, the implications are that the current liabilities were lower in 2021 than in 2020, giving them a stronger current ratio. This reflects positively on the business and represents they are able to pay off their obligations and meet commitments.

 

 

 

On the income statement, the biggest change was an increase in operating expense, increasing by a whopping 344% YoY. According to the annual report, this is, in large, due to currency exchange rate contracts triggering higher expenses. As Medtronic is an international business, avoiding issues like these is a troublesome matter, and other businesses were in the same position being forced to take a loss due to unfavorable exchange rates in the global economic realm. This expense decreased operating profit, and thus the net income of the business, which was lower in 2021 than in 2020. Because

 

 

this is due to conditions outside of Medtronic’s control, the business still would be a desirable investment.

 

Similar to the balance sheet, the largest changes between 2020 and 2021 for the statement of cash flows was change in current debt obligations and more owed for repayments from short-term borrowings under financing activities. The debt obligations can be a sign of investment into future growth of the business, but these numbers do affect the overall cash available at the end of 2021, which was less than that of 2020. This can signal to lenders that Medtronic may be a risky investment, which will hurt the business in the long run.

 

 

 

 

Medtronic. (2021). Annual Report. Retrieved from https://www.annualreports.com/Company/medtronic-incLinks to an external site.

Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.). Retrieved from https://www.cengage.com

 

SOLUTION

Horizontal analysis is a financial analysis technique that compares financial data over a period of time to identify trends and changes in a company’s performance. In the case of Apple, we can perform a horizontal analysis by comparing the company’s financial data for the past three years.