Strategic Intervention
Material for Cash Flow
Statement and Financial
Statement Analysis
(The Least-Mastered Competencies)
Prepared By:
Abenoja, Abygail E.
Asas, Ciena Mae C.
Concha, Mary Joy R.
Figueroa, Angel Feliz G.
Gadia, Marjorie G.
Lanuzga, Krizle Joy S.
BSA-4A
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Table of Contents
Title Page
Table of Contents
Cash Flow Statement
 Objectives
 Quick Review
 Activities
 References
 Answer Key
Financial Statement Analysis
 Objectives
 Quick Review
 Activities
 References
 Answer Key
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
I. CASH FLOW STATEMENT (CFS)
The learners should demonstrate an understanding of the
components and the structure of a Cash Flow Statement that will
equip them in the preparation of the said financial report. Specifically,
the learners shall be able to solve exercises and problems that requires
the preparation of CFS. The learners should be able to:
1. discuss the components and structures of a CFS;
2. and prepare a Cash Flow Statement.
What is a Cash Flow Statement and its importance?
A cash flow statement is a part of a financial statement that
summarizes an entity's operating, investing, and financing activities. It
basically reports an entity's cash receipts (inflow) and cash payments
(outflow) during a given time period.
The CFS is important as it reflects how the entity’s operations
are running and measures how well the company manages its cash
position, thus helping investors to determine whether an entity is on
solid financial footing.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Components of Cash Flow Statements
The Cash Flow Statement has 3 parts; operating, investing and
financing activities. There can also be a disclosure of non-cash
activities.
Operating Activities The cash flows generated primarily by an entity's
primary revenue-generating activities are known
as operating activities. The operating activities
includes delivering or producing goods for sale
and providing services; and the cash effects of
the transaction and other events that enter into
the determination of income.
Investing Activities The cash flows resulting from the acquisition and
disposal of long-term assets and other
investments that are not included in cash
equivalents are referred to as investing activities
of which cash effects of transactions involving
non-operating assets. The investing activities
include acquiring and selling or otherwise
disposing of (a) securities that are not cash
equivalents and (b) productive assets that are
expected to benefit the firm for long periods of
time; and lending money and collecting of loans.
Financing Activities The cash flows from the entity's equity capital
and borrowings are referred to as financing
activities of which cash effects of nontrade
liabilities and equity transactions. The financing
activities include borrowing from creditors and
repaying the principal; and obtaining resources
from owner and providing them with a return
on investment.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Note that, non-cash investing and financing activities affection
the financial position shall be excluded from cash flow statement. Such
transactions should be disclosed elsewhere in the financial statement
(e.g., notes to financial statements.)
Calculating Cash Flow from Operating Activities
Direct and Indirect Method are the two methods in calculating
cash flow from operating activities. The direct method encourages the
entity to report major classes of gross cash receipts and gross cash
payment and the net cash flow from operating activities. On the other
hand, the indirect method, the entity does not provide the major
classes of operating cash receipts and payments by direct method shall
determine and report the same amount of net cash flow from
operating activities indirectly by adjusting net income to reconcile it to
net cash flow from operating activities. Hence, regardless of which
method is used, the reconciliation of net income to net cash flow from
operating activities shall be presented.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Below is an illustrative example of a Cash Flow Statement using Direct Method.
Wedding “R” Us
Statement of Cash Flow
For the month Ended May 31, 2018
Cash Flow from Operating Activities:
Cash received from clients
Payments to suppliers
Payments to employees
Payment for office rents
Payment for insurance
Payment for utilities
Net cash provided by (used in) operating activities
P60,400
(10,000)
(13,800)
(8,000)
(14,400)
(3,000)
Cash Flow from Investing Activities:
Payments to acquire service vehicle
Payments to acquire office equipment
Net cash provided by (used in) investing activities
P(420,000)
(15,000)
Cash Flow from Financing Activities:
Cash received as investments by owners
Cash received from borrowings
Payments for withdrawals by owners
Net cash provided by (used in) financing activities
P250,000
210,000
(14,000)
P11,200
P(435,000)
P446,000
Net increase (decrease) in cash
P22,200
Cash balance at the beginning of the period
Cash balance at the end of the period
___-___
P22,200
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Below is an illustrative example of a Cash Flow Statement using Indirect Method.
Kalikasan Company
Statement of Cash Flow
For the Year Ended December 31, 2015
Net Cash Flow from Operating Activities
Net Income Before Interest Expense
Adjustments for differences between income
flows and cash flows from operating activities:
Add: Depreciation Expense
Decrease in Accounts Receivable
Increase in Salaries Payable
Less: Increase in Inventory
Decrease in accounts payable
Gain on sale of equipment
Interest Expense
Income Tax Expense
Net cash provided by operation
Cash Flow from Investing Activities
Payment for purchase of equipment
Proceeds from sale of equipment
Net cash used for investing activities
Cash Flow from Financing Activities
Proceeds from issuance of bonds
Payment of dividends
Net cash provided by financing activities
Net increase in cash
Cash Balance, January 1, 2015
Cash Balance, December 31, 2015
P12,100
3,400
800
400
(1,600)
(1,900)
(600)
(100)
(3,600)
P8,900
P(15,200)
2,100
P(13,100)
P8,000
1,800
P6,200
P2,000
3,500
P5,500
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Activity 1: Identify which of the following transactions fall under
operating (O), investing (I), and financing activities (F):
Cash received from customers
Cash paid to suppliers
Cash paid to employees
Cash paid to a purchase of equipment (Company does
not sell the equipment)
Cash received from sale of furniture (company’s main line
of business is not related to furniture)
Depreciation Expense
Sales of goods on credit
Purchase of goods on credit
Cash received from getting a loan from a bank
Cash paid to owners
Activity 2: The following transactions pertain to the operations of
Party Consultants, an event planning entity owned by Eleonor Tan.
The entity had the following transactions during the month:
Received a P180,000 cash investment from the owner.
Provided P400,000 services on account.
Incurred P220,000 of operating expenses on account.
Collected P320,000 cash from accounts receivable.
Allowed a P30,000 cash withdrawal to the owner of the
business.
• Paid P160,000 cash on accounts payable.
• Performed services for P30,000 cash.
•
•
•
•
•
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
• Paid P12,000 cash for expenses.
Required:
Classify each of these transactions as a cash flow from operating
activities (OA) investing activities (IA), or financing activities
(FA). Transactions that do not affect the statement of cash flows
should be identified as “n/a”.
Prepare a statement of cash flows using direct method.
Activity 3
Juana’s sari-sari store had the following transactions during the year:
Purchase of goods. Paid Cash.
Sale of goods. Received cash.
Paid utilities
Paid rent
Sold equipment for cash
Owners withdraws investment
P100,000
150,000
30,000
10,000
100,000
10,000
Required:
Compute for the net cash flow generated by/used in operating
activities.
Using the given above, compute for the net cash flow generated
by/used in investing activities.
Using the given above, compute for the net cash flow generated
by/used in financing activities.
Using the given above, prepare a Cash Flow Statement using
direct method.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Activity 4
PCY Solutions had a profit of P330,000 in 2018. During the year, the
entity had depreciation expense of P70,000. Accounts receivable
increased by P110,000 and accounts payable increased by P50,000.
The entity started operations in 2018 and the foregoing are the
entity’s only current assets and liabilities.
Required: Determine the net cash flows from operating activities
using the indirect method.
Activity 5
The EXO Company provides the following information for the year
2016. Calculate net cash provided/used by investing activities for EXO
Company.
a. Old plant asset sold for P164,000 and the gain on such sale was
P5,000
b. Treasury stock purchase for P42,000
c. Investment purchased for P25,000
d. A new plant asset purchased for P115,000
e. Common stock issued for P375,000
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Activity 6
The following activities were performed by SM Corporation during
the year 2021.
Treasury shares purchased
Accounts payable paid
Notes receivable collected
Dividends paid
Bonds payable issued
Ordinary shares issued
P35,000
585,000
50,000
190,000
340,000
175,000
Required: Compute net cash provided/used by financing
activities to be reported in the statement of cash flows of SM
Corporation.
Activity 7: Prepare the Cash Flow Statement of Teresa’s Deliver
Services using the following:
Net Income
Depreciation Expense
Gain on sale of property and
equipment
Increase in trade and other
receivables – net
Increase in trade and other
payables
Amount of proceeds from sale of
property and equipment
Paid loan from a bank
Cash, January 1, 2016
P500,000
70,000
10,000
250,000
150,000
50,000
100,000
70,000
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
QUICK REVIEW:
Valix, C., Peralta, J., & Valix, C.A. (2019). Intermediate Accounting 2
Volume 3. GIC Enterprises & Co., Inc.
Cabrera, M.E.. (2015). Financial Management Principles and
Applications. GIC Enterprises & Co., Inc.
ACTIVTIES:
Florendo, J., Monfero, R.P., Andres, C., Salazar, D.R., DelaCruz, B.N.,
Honorario, C., & Aguillon, D.D. (2016). Teaching Guide for Senior
High School Fundamentals of Accountancy, Business, and
Management 2. Commission on Higher Education.
https://www.depedk12.com/2019/07/senior-high-school-teachingguides.html?m=1
Ballada, W., & Ballada, S., (2018). Basic Financial Accounting and
Reporting Made Easy 2018 edition. Domdane Publishers.
Javed, R. (2012). Accounting Management.org updated Oct 2021.
https://www.accountingformanagement.org/exercises/statement-ofcash-flows-exercises/
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
ACTIVITY 1: Suggested Answer
1. Operating
2. Operating
3. Operating
4. Investing
5. Investing
6. Non-Cash
7. Non-Cash
8. Non-Cash
9. Financing
10. Financing
ACTIVITY 2: Suggested Answer 2
1.
2.
3.
4.
FA
n/a
n/a
OA
5. FA
6. OA
7. OA
8. OA
Suggested Answer: 2.2
PARTY CONSULTANTS
Statement of Cash Flows
For the month ended _______, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers
Cash paid to suppliers
Cash paid for other operating expenses
Net Cash Provided By Operating Activities
P350,000
(160,000)
(12,000)
P178,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received as investment by the owner
P180,000
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Cash paid to owner as withdrawal of capital
Net Cash Provided By Financing Activities
(30,000)
P150,000
NET INCREASE IN CASH DURING
THE MONTH
ADD: BEGINNING CASH BALANCE
ENDING CASH BALANCE
P328,000
- 0 P328,000
ACTIVITY 3
3.1. Suggested Answer: P10,000 generated by operating activities
3.2. Suggested Answer: P100,000 generated by investing
3.3. Suggested Answer: P10,000 used in financing activities
3.4. Suggested Answer:
JUANA’S SARI-SARI STORE
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
Cash flows from Operating Activities
Sale of goods
Purchase of goods
Paid utilities
Paid rent
Net Cash generated by Operating Activities
P 150,000.00
(100,000.00)
(30,000.00)
(10,000.00)
Cash flows from Investing Activities
Sold equipment
Cash flow generated from investing activity
P 100,000.00
Cash flows from Financing Activities
Withdrawals by owner
Cash flow from used in Financing Activities
(P 10,000.00)
Net change in cash
Cash, January 1, 2016
Cash, December 31, 2016
P 10,000.00
P 100,000.00
(P 10,000.00)
P 100,000.00
50,000.00
P 150,000.00
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
ACTIVITY 4: Suggested Answer
PCY SOLUTIONS
Statement of Cash Flows
For the year ended _______, 2018
Profit
Adjustments:
Depreciation expenses
Increase in Accounts Receivable
Increase in Accounts Payable
CASH FLOW FROM OPERATING ACTIVITIES
P330,000
`
70,000
(110,000)
50,000
P340,000
ACTIVITY 5: Suggested Answer
EXO COMPANY
Statement of Cash Flows
For the year ended _______, 2016
Cash flows from investing activities:
Sale of plant asset
Purchase of plant asset
Purchase of investment
NET CASH PROVIDED BY INVESTING ACTIVITIES
P164,000
(115,000)
(25,000)
P24,000
*The sale proceeds of old plant asset of P164,000 include gain of P5,000.
*Purchase of treasury stock and the issuance of common stock are not investing
activities.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
ACTIVITY 6: Suggested Answer
SM CORPORATION
Statement of Cash Flows
For the year ended _______, 2021
Cash flows from financing activities:
Issuance of ordinary shares
Issuance of bonds payable
Purchase of treasury shares
Payment of dividends
NET CASH PROVIDED BY FINANCING ACTIVITIES
P175,000
(340,000)
(35,000)
(190,000)
P290,000
*Payment of accounts payable and collection of note receivable are both not
financing activities and have therefore not been included in the above
computation.
ACTIVITY 7: Suggested Answer
TERESA’S DELIVERY SERVICES
CASH FLOW STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
Cash flows from Operating Activities
Net Income
Add back: Depreciation Expense
Less: Gain on sale of property and Equipment
(Increase)in Trade and Other Receivables - Net
Increase in Trade and Other Payables
Net cash generated by Operating Activities
P500,000
70,000
(10,000)
560,000
(250,000)
150,000
P460,000
Cash flow from investing activity
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Proceeds from sale of property and equipment
Net cash flow generated from investing activity
P50,000
P50,000
Cash flow from financing activity
Paid loan from a bank
Net cash flow from used in financing activity
P100,000
P100,000
Net change in cash
Cash, January 1, 2016
Cash, December 31, 2016
P610,000
70,000
P680,000
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
II. FINANCIAL STATEMENT ANALYSIS
(FSA)
The learners should demonstrate an understanding of
measurement levels of a financial statement such as liquidity, solvency,
stability, and profitability to determine the standing of the company’s
performance during the reporting period. Moreover, learners should
be able to analyze and compute financial statements horizontally and
vertically. The learners should be able to:
1. Define the measurement levels, namely, liquidity, solvency, stability,
and profitability.
2. Perform vertical and horizontal analysis of financial statements of a
single proprietorship.
What is Financial Statement Analysis?
Financial Statement Analysis is the process of assessing risks,
performance, financial health, and future prospects of a company to
understand the situation or standing of a company during the period.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Simply, financial statement analysis is the process of analyzing
company’s financial statement for decision-making purposes. External
users use it to ascertain the overall health of the entity as well as to
evaluate its financial performance and business value while internal
constituents use it as a monitoring tool for managing entity’s finances.
There are three most common techniques in analyzing financial
statements namely horizontal analysis, vertical analysis and financial
ratios.
1. Horizontal Analysis – Horizontal analysis is also known as
“trend analysis.” This technique is use to spot and evaluate
financial trends over a specific period of time. It allows the
company to view its growth over the period.
Horizontal analysis uses a line by line item comparison to
compare the totals revealing the behaviour of the account over
time. For example, if you run a comparative income statement
for 2020 and 2021, horizontal analysis will allow you to
compare the company’s revenue and expense totals for both
years to see if it increased, decrease or remained relatively
stagnant.
How to perform horizontal analysis?
Step 1: Run a comparative income statement and balance sheet for the period
you want to compare. You’ll need a minimum of two periods to compare, but
you’ll be able to spot trends much better if you use at least three periods.
Step 2: Decide how you want to approach your horizontal analysis because
you have several options.
Option 1: Direct Comparison – This is simply comparing the
results of one accounting period to another. Example, your 2020
revenues was P12,000 and your 2021 revenue was P15,700, the
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
difference would be P3,700. The comparison method will allow
you to quickly view any changes from period to period and
whether those changes are beneficial or require further research.
Option 2: Variance - You can choose to calculate the variance
between your chosen periods to determine whether the impact is
positive or negative. The variance method is particularly helpful
when the horizontal analysis is being used to determine the
financial health of your business by those outside the business,
such as investors and creditors.
Option 3: Percentage - The percentage method is helpful if you’re
looking for more in depth analysis. Using the percentage
methods, the first period of your income statement or balance
sheet is considered your based period, with each subsequent
period comparing line-by-line results to the base year. Using the
example in option 1, the difference in revenue between 2020 and
2021 was P3,700, so you would use the following horizontal
analysis formula to determine the percentage by which revenue
increased:
To compare the revenue of 2020 and 2021, you have P3,700
difference (P12,000 - P15,700)
= P3,700 ÷ 12,000 х 100
= 30.83%.
This means that from 2020 to 2021, your revenue increased by
30.83%
2. Vertical Analysis - Vertical analysis is also known as
“common size analysis”. It is a method of analyzing financial
statements that list each line item as a percentage of a base figure
within the statement. The first line of the statement always
shows the base figure at 100%, with each following line item
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
representing a percentage of the whole. Example, each line of an
income statement represents a percentage of gross sales. It is
used to understand the proportions of each line item to the
whole, understand key trends that occur over time, compare
multiple companies of varying sizes or compare a company's
financial statements to averages within their industry.
How to perform vertical analysis?
The formula for vertical analysis is statement line item ÷ total based figure.
Example,
3. Financial Ratios
Financial ratios are useful tools that help business managers and
investors analyze and compare financial relationships between the
accounts on the firm's financial statements. They are one tool that makes
financial analysis possible across a firm's history, an industry, or a
business sector. Financial ratio analysis uses the data gathered from the
calculation of the ratios to make decisions about improving a firm's
profitability, solvency, and liquidity.
Different Measurement Levels
Liquidity – Liquidity ratios answer the question of whether a
business firm can meet its current debt obligations with its current
assets. Liquidity, simply means the ability of a company to meet shortterm liabilities in a short period. Moreover, liquidity is connected to
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
cash which is highly liquid among all assets of a company.
There are three major liquidity ratios
Working capital ratio: This ratio is also called the current ratio
(current assets - current liabilities). These figures are taken off the
firm's balance sheet. It measures whether the business can pay its
short-term debt obligations with its current assets.
Quick ratio: This ratio is also called the acid test ratio (current
assets - inventory/current liabilities). These figures come from the
balance sheet. The quick ratio measures whether the firm can
meet its short-term debt obligations without selling any
inventory.
Cash ratio: This liquidity ratio (cash + cash equivalents/current
liabilities) gives a financial manager a more conservative view of
the firm's liquidity since it uses only cash and cash equivalents,
such as short-term marketable securities, in the numerator. It
indicates the ability of the firm to pay off all its current liabilities
without liquidating any other assets.
Solvency – A solvency ratio is a key metric used to measure an
enterprise’s ability to meet its long-term debt obligations and is used
often by prospective business lenders. A solvency ratio indicates
whether a company’s cash flow is sufficient to meet its long-term
liabilities and thus is a measure of its financial health. An unfavorable
ratio can indicate some likelihood that a company will default on its
debt obligations.
There are two major solvency ratios:
Total debt ratio: The total debt ratio (total liabilities/total assets)
measures the percentage of funds for the firm's operations
obtained by a combination of current liabilities plus its long-term
debt.
Debt-to-equity ratio: This ratio (total liabilities/total assets - total
liabilities) is most important if the business is publicly traded. The
information from this ratio is essentially the same as from the
total debt ratio, but it presents the information in a form that
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
investors can more readily utilize when analyzing the business.
Profitability - Profitability ratios are financial metrics used to asses a
firm’s ability to generate earnings relative to its revenue, operating
costs, balance sheet assets, or shareholder’s equity over time, using
data from a specific pint in time.
The four most common and important profitability
ratios are:
Net profit margin: This ratio (net income/sales) shows the profit
per peso of sales for the business firm.
Return on total assets (ROA): The ROA ratio (net income/sales)
indicates how efficiently every peso of total assets generates
profit.
Basic earning power (BEP): BEP (EBIT/total assets) is similar to
the ROA ratio because it measures the efficiency of assets in
generating sales. However, the BEP ratio makes the
measurement free of the influence of taxes and debt.
Return on equity (ROE): This ratio (net income/common equity)
indicates how much money shareholders make on their
investment in the business firm. The ROE ratio is most important
for publicly traded firms.
Additionally, stability.
Stability is the long term counterpart of liquidity. Stability
analysis investigates how much debt can be supported by the
company and whether debt and equity are balanced. The most
common stability ratios are the debt-to-equity and gearing called
leverage.
debt-to-equity ratio = (Net debt) / (Shareholders’ equity)
gearing = (Net debt) / (Net debt + Shareholders’ equity)
Net debt = Interest-bearing debt – Excess cash
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
Activity 1: Write your answer on the space provided.
1. The purpose of financial statement analysis not only to
understand the historical results of financial statement but
also to use that information to forecast the future
2. The benchmark used in trend analysis is a given firm’s
performance over a period of time.
3. The benchmark used in cross-sectional analysis is the prior
performance of the firm currently undergoing analysis.
4. In doing ratio analysis, we must recognize that different
firms provide different levels of disclosure
5. A ratio is most meaningful when the numerator and
denominator are related to each other.
Activity 2: MULTIPLE CHOICE
1. In financial analysis, ratios are used to help us learn about the
firm’s:
a. profitability
b. growth and potential for
growth
c. resource needs
d. All of the above answers are
correct
2. There are two key ratios that measure operating profitability.
The numerator for the __ ratio uses income while the __ ratio
uses revenues less cost of goods sold in its computation.
a. gross margin percentage; operating margin percentage
b. operating margin percentage; gross margin percentage
c. quick; operating margin percentage
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
d. current; gross margin percentage
3. The analyst must exercise caution when using ratios as part of
the analysis of a firm. The fact that ratios often vary across
industries is an example of what is called:
a. an accounting method discrepancy
b. an industry and business difference
c. a business environment change
d. an ambiguous ratio definition
4. A ratio has a little meaning until it is compared to a benchmark.
financial analysts use several common benchmarks to help them
better understand and interpret financial ratios. The benchmark
in which ratios from several different companies or an industry
segment are analyzed is known as a:
a. Cross-sectional analysis
b. Trend analysis
c. Cause-of-change- analysis
d. Cause-of-action analysis
5. A firm has the following operating income rates for the last four
years: 2000, 9.0%; 2001, 8.9%; 2002, 9.1%; 2003, 8.8%.
From a standpoint of trend analysis, what conclusion might an
analyst reach regarding the firm’s revenue growth?
a. The trend analysis indicates the firm’s operating income has
been flat over time.
b. The trend analysis indicates the firm’s operating income has
materially declined over time and is cause for investor concern.
c. The trend analysis indicates the firm’s operating income has
been increasing at a fiscally healthy rate over time.
d. The conclusion is indeterminable from the information given
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
ACTIVITY : The data for Abakada Trading Company are as follows:
2014
2015
Revenue
P1,939,500
P1,674,675
Cost of Goods Sold
900,000
843,975
Gross Profit
1,039,500
830,700
Selling and General Expenses
445,500
409,725
Other Expenses
37,575
30,825
Net Income
556,425
390,150
Required: a. Prepare a common-size Statement of
Comprehensive Income for 2014 and 2013 for Abakada Trading
Company.
b. Prepare a horizontal analysis for Abakada Trading
Company.
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
QUICK REVIEW:
Girsch-Bock, M. (2020). Horizontal analysis: Should you be using it in
your business? Retrieved from
https://www.google.com/m?q=horizontal+analysis&client=ms-operamobile&channel=new&espv=1 on December 27,2021
Investaura Ltd. (2021). The art of business planning. Retrieved from
http://www.business-planning-for-managers.com/maincourses/finance/financial-ratios/stability-ratios/ on December 27, 2021
Hayes, A. (2021). Profitability Ratios. Retrieved from
https://www.investopedia.com/terms/p/profitabilityratios.asp on
December 27, 2021
ACTIVITY:
Go, W. (2020). Financial statement analysis, test bank. Retrieved from
https://www.studocu.com/ph/document/university-of-perpetual-helpsystem-jonelta/financial-management/tbch05-test-bank/9502154 on
December 27,2021
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”
ACTIVITY 1: Suggested Answer
1. True
2. true
3. false
4. true
5. true
4. A
5. A
ACTIVITY 2: SUGGESTED ANSWER
1. D
2. B
3. B
ACTIVITY : ABAKADA TRADING
2014
%
2015
%
1,674,675
Y-o-Y Growth
Revenue
1,939,500
Cost of Goods Sold
900,000
46% 843,975
50% 7%
Gross Profit
1,039,500
54% 830,700
50% 25%
Selling and General
Expenses
445,500
23% 409,725
24% 9%
Other Expenses
37,575
2%
2%
Net Income
556,425
29% 390,150
30,825
16%
22%
23% 43%
*** An output of the research study entitled “Competencies Gained by Senior
High School – Accountancy, Business and Management Graduates”