condensed financial statements leeward corporation 2006 and 2005 are presented below leeward

The condensed financial statements of Leeward Corporation for 2006 and 2005 are presented below. Leeward Corporation Leeward Corporation Balance Sheet Income Statement December 31, 2006 For the Year Ended December 31, 2006 Assets Revenues $2,500,000 Current assets Expenses Cash and temporary Cost of goods sold 1,080,000 investments $ 50,000 Selling and administrative Accounts receivable 70,000 expenses 495,000 Inventories 120,000 Interest expense 30,000 Total current assets 240,000 Total expenses 1,605,000 Property, plant, and Income before income taxes 895,000 equipment (net) 780,000 Income tax expense 268,500 Total assets $1,020,000 Net income $ 626,500 Liabilities and Stockholders’ Equity Current liabilities $ 100,000 Long-term liabilities 300,000 Common stockholders’ equity 620,000 Total liabilities and stockholders’ equity $1,020,000 Leeward Corporation Leeward Corporation Balance Sheet Income Statement December 31, 2005 For the Year Ended December 31, 2005 Assets Revenues $2,500,000 Current assets Expenses Cash and temporary Cost of goods sold 1,750,000 investments $ 40,000 Selling and administrative Accounts receivable 90,000 expenses 500,000 Inventories 150,000 Interest expense 30,000 Total current assets 280,000 Total expenses 2,280,000 Property, plant, and Income before income taxes 220,000 equipment (net) 800,000 Income tax expense 66,000 Total assets $1,080,000 Net income $ 154,000 Liabilities and Stockholders’ Equity Current liabilities $ 140,000 Long-term liabilities 320,000 Common stockholders’ equity 620,000 Total liabilities and stockholders’ equity $1,080,000 Instructions 1. Compute the following listed ratios for 2006. (a) Current ratio = . (b) Debt to total assets = . (d) Profit margin ratio = . (e) Return on common stockholders’ equity = . (f) Return on assets = . 2. Perform horizontal analysis on both the balance sheet and income statement. Leeward Corporation Balance Sheet Horizontal Analysis 2006 2005 Change Percent Assets Cash and temporary investments $50,000 $40,000 Accounts receivable $70,000 $90,000 Inventories $120,000 $150,000 Total current assets $240,000 $280,000 Property, plant and equipment $780,000 $800,000 Total assets $1,020,000 $1,080,000 Liabilities & Stockholder’s Equity Current liabilities $100,000 $140,000 Long-term liabilities $300,000 $320,000 Common stockholder’s equity $620,000 $620,000 Total liabilities and stockholder’s equity $1,020,000 $1,080,000 Leeward Corporation Income Statement Horizontal Analysis 2006 2005 Change Percent Revenues $2,500,000 $2,500,000 Expenses Cost of goods sold $1,080,000 $1,750,000 Selling & administrative expense $495,000 $500,000 Interest expense $30,000 $30,000 Total Expenses $1,605,000 $2,280,000 Income before income taxes $895,000 $220,000 Income tax expense $268,500 $66,000 Net Income $626,500 $154,000 3. Perform vertical analysis on both the balance sheet and income statement for 2005 and 2006. Leeward Corporation Balance Sheet Vertical Analysis 2006 2005 Amount Percent Amount Percent Assets Cash and temporary investments $50,000 $40,000 Accounts receivable $70,000 $90,000 Inventories $120,000 $150,000 Total current assets $240,000 $280,000 Property, plant and equipment $780,000 $800,000 Total assets $1,020,000 $1,080,000 Liabilities & Stockholder’s Equity Current liabilities $100,000 $140,000 Long-term liabilities $300,000 $320,000 Common stockholder’s equity $620,000 $620,000 Total liabilities and stockholder’s equity $1,020,000 $1,080,000 Leeward Corporation Income Statement Vertical Analysis 2006 2005 Amount Percent Amount Percent Revenues $2,500,000 $2,500,000 Expenses Cost of goods sold $1,080,000 $1,750,000 Selling & administrative expense $495,000 $500,000 Interest expense $30,000 $30,000 Total Expenses $1,605,000 $2,280,000 Income before income taxes $895,000 $220,000 Income tax expense $268,500 $66,000 Net Income $626,500 $154,000 4. Assess the financial performance of Leeward, using your analysis in #2 and #3 above. How have things changed from 2005 to 2006? 5. If the company wanted to perform industry comparison analysis, what references would you recommend it use?

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