Balance Sheet as per Schedule VI

Indian Companies Act, 1956

Liabilities

Share capital
Reserves and Surplus
Secured Loans
Unsecured Loans
Current Liabilities

Assets

Fixed Assets
Investments
Current assets
Miscellaneous
Expenditure
P & L a/c (Dr)

Horizontal Analysis
What is horizontal
analysis?

Horizontal Analysis
Its an analysis of the percentage
increases and decreases of related
items in comparative financial
statements.

Lincoln Company
Comparative Balance Sheet
December 31, 2006 and 2005

Balance Sheet
Increase (Decrease)
Amount
Percent
$ 17,000
3.2%
(82,500) (46.5%)
(25,500) (5.4%)

$ (91,000) (7.4%)

2006
2005
Assets
Current assets
$ 550,000 $ 533,000
Long-term investments
95,000
177,500
Fixed assets (net)
444,500
470,000
Intangible assets
50,000
50,000
Total assets
$1,139,500 $1,230,500
Liabilities
Current liabilities
$ 210,000 $ 243,000 $ (33,000) (13.6%)
Long-term liabilities
100,000
200,000 (100,000) (50.0%)
Total liabilities
$ 310,000 $ 443,000 $(133,000) (30.0%)
Stockholders Equity
Preferred 6% stock, $100 par$ 150,000 $ 150,000

Common stock, $10 par

500,000
500,000

Retained earnings
179,500
137,500
$42,000
30.5%
Total stockholders equity $ 829,500 $ 787,500
$42,000
5.3%
Total liab. & SE
$1,139,500 $1230,500 $(91,000) (7.4%)

Lincoln Company
Comparative Balance Sheet
December 31, 2006 and 2005

Increase (Decrease)
2006
2005
Amount
Percent
$ 550,000 $ 533,000 $ 17,000
3.2%
95,000
177,500
(82,500) (46.5%)
444,500 Analysis:
470,000
(25,500) (5.4%)
Horizontal
50,000
50,000

Difference
$1,139,500
$1,230,500$17,000
$ (91,000) (7.4%)

Assets
Current assets
Long-term investments
Fixed assets (net)
Intangible assets
Total assets
=
Liabilities
Base year (2005) $533,000
Current liabilities
$ 210,000 $ 243,000 $ (33,000)
Long-term liabilities
100,000
200,000 (100,000)
Total liabilities
$ 310,000 $ 443,000 $(133,000)
Stockholders Equity
Preferred 6% stock, $100 par$ 150,000 $ 150,000

Common stock, $10 par

500,000
500,000

Retained earnings
179,500
137,500
$42,000
Total stockholders equity $ 829,500 $ 787,500
$42,000
Total liab. & SE
$1,139,500 $1230,500 $(91,000)

3.2%

(13.6%)
(50.0%)
(30.0%)

30.5%
5.3%
(7.4%)

Lincoln Company
Comparative Balance Sheet
December 31, 2006 and 2005

Increase (Decrease)
Amount
Percent
$ 17,000
3.2%
(82,500) (46.5%)
(25,500) (5.4%)

$ (91,000) (7.4%)

2006
2005
Assets
Current assets
$ 550,000 $ 533,000
Long-term investments
95,000
177,500
Fixed assets (net)
444,500
470,000
Intangible assets
50,000
50,000
Total assets
$1,139,500 $1,230,500
Horizontal Analysis:
Liabilities
Current liabilities
$ 210,000 $ 243,000 $ (33,000) (13.6%)
Difference
$(82,500)
Long-term liabilities
100,000
200,000 (100,000)
(50.0%)
= (46.5%)
Base
year (2005)
$177,500
Total liabilities
$ 310,000
$ 443,000
$(133,000) (30.0%)
Stockholders Equity
Preferred stock, $100 par $ 150,000 $ 150,000

Common stock, $10 par

500,000
500,000

Retained earnings
179,500
137,500
$42,000
30.5%
Total stockholders equity $ 829,500 $ 787,500
$42,000
5.3%
Total liab. & SE
$1,139,500 $1230,500 $(91,000) (7.4%)

Lincoln Company
Comparative Balance Sheet
December
31, go
2006to
andthe
2005next
Okay,

slideIncrease (Decrease)
2006
2005
Amount
Percent
and calculate
the
Assets
Current assets percentage
$ 550,000
$ 533,000
$ 17,000
3.2%
change
for
fixed
Long-term investments
95,000
177,500
(82,500) (46.5%)
Fixed assets (net)
444,500
assets. 470,000 (25,500) (5.4%)

Intangible assets
50,000
50,000

Total assets
$1,139,500 $1,230,500 $ (91,000) (7.4%)
Liabilities
Horizontal
Current liabilities
$ 210,000 Analysis:
$ 243,000 $ (33,000) (13.6%)
Long-term liabilities
100,000
200,000 (100,000) (50.0%)
Total liabilities
$ Difference
310,000 $ 443,000 ? $(133,000) (30.0%)
= ?
Stockholders Equity
Base year (2005)
?
Preferred 6% stock, $100 par$ 150,000 $ 150,000

Common stock, $10 par

500,000
500,000

Retained earnings
179,500
137,500
$42,000
30.5%
Total stockholders equity $ 829,500 $ 787,500
$42,000
5.3%
Total liab. & SE
$1,139,500 $1230,500 $(91,000) (7.4%)

Lincoln Company
Comparative Balance Sheet
December 31, 2006 and 2005

Increase (Decrease)
Amount
Percent
$ 17,000
3.2%
(82,500) (46.5%)
(25,500) (5.4%)

$ (91,000) (7.4%)

2006
2005
Assets
Current assets
$ 550,000 $ 533,000
Long-term investments
95,000
177,500
Fixed assets (net)
444,500
470,000
Intangible assets
50,000
50,000
Total assets
$1,139,500 $1,230,500
Liabilities
(5.4%)
Current liabilities
$ 210,000 $ 243,000 $ (33,000) (13.6%)
Long-term liabilities
100,000
200,000 (100,000) (50.0%)
Total liabilities
$ 310,000 $ 443,000 $(133,000) (30.0%)
Stockholders Equity
Preferred 6% stock, $100 par$ 150,000 $ 150,000

Common stock, $10 par

500,000
500,000

Retained earnings
179,500
137,500
$42,000
30.5%
Total stockholders equity $ 829,500 $ 787,500
$42,000
5.3%
Total liab. & SE
$1,139,500 $1230,500 $(91,000) (7.4%)

Lincoln Company
Comparative Income Statement
December 31, 2006 and 2005

Income Statement

2006
2005
Sales
$1,530,500 $1,234,000
Sales returns
32,500
34,000
Net sales
$1,498,000 $1,200,000
Cost of goods sold
1,043,000
820,000
Gross profit
$ 455,000 $ 380,000
Selling expenses
$ 191,000 $ 147,000
Administrative expenses
104,000
97,400
Total operating expenses $ 295,000 $ 244,400
Operating income
$ 160,000 $ 135,600
Other income
8,500
11,000
$ 168,500 $ 146,600
Other expense
6,000
12,000
Income before income tax $ 162,500 $ 134,600
Income tax
71,500
58,100
Net income
$ 91,000 $ 76,500

Increase (Decrease)
Amount
Percent
$296,500
24.0%
(1,500) (4.4%)
$298,000
24.8%
223,000
27.2%
$ 75,000
19.7%
$ 44,000
29.9%
6,600
6.8%
$ 50,600
20.7%
$ 24,400
18.0%
(2,500) (22.7%)
$ 21,900
14.9%
(6,000) (50.0%)
$ 27,900
20.7%
13,400
23.1%
$ 14,500
19.0%

Lincoln Company
Comparative Income Statement
December 31, 2006 and 2005

Increase (Decrease)
2006
2005
Amount
Percent
Sales
$1,530,500 $1,234,000 $296,500
24.0%
Sales returns
32,500
34,000
(1,500) (4.4%)
Net sales
$1,498,000 $1,200,000 $298,000
24.8%
Cost of goods sold
1,043,000
820,000
223,000
27.2%
Gross profit
$ 455,000 $ 380,000 $ 75,000
19.7%
Horizontal Analysis:
Selling expenses
$ 191,000 $ 147,000 $ 44,000
29.9%
Administrative expenses
104,000
6.8%
Increase
amount97,400
$296,500 6,600
Total operating expenses $ 295,000 $ 244,400 $ 50,600
= 24.0%20.7%
Base
year (2005)
$1,234,000
Operating income
$ 160,000
$ 135,600
$ 24,400
18.0%
Other income
8,500
11,000
(2,500) (22.7%)
$ 168,500 $ 146,600 $ 21,900
14.9%
Other expense
6,000
12,000
(6,000) (50.0%)
Income before income tax $ 162,500 $ 134,600 $ 27,900
20.7%
Income tax
71,500
58,100
13,400
23.1%
Net income
$ 91,000 $ 76,500
$ 14,500
19.0%

Lincoln Company
Comparative Income Statement
December 31, 2006 and 2005

Increase (Decrease)
2006
2005
Amount
Percent
Sales
$1,530,500 $1,234,000 $296,500
24.0%
Sales returns
32,500
34,000
(1,500) (4.4%)
24.8%
Net sales
$1,498,000 $1,200,000 $298,000
24.8%
Cost of goods sold
1,043,000
820,000
223,000
27.2%
Gross profit
$ 455,000 $ 380,000 $ 75,000
19.7%
Selling expenses
$ 191,000 $ 147,000 $ 44,000
29.9%
Administrative expenses
104,000
97,400
6,600
6.8%
Total operating expensesHorizontal
$ 295,000
$ 244,400 $ 50,600
20.7%
Analysis:
Operating income
$ 160,000 $ 135,600 $ 24,400
18.0%
Other income
8,500
Increase
amount11,000
$298,000 (2,500) (22.7%)
= 24.8%14.9%
$ 168,500 $ 146,600 $ 21,900
Base year
(2005)12,000
$1,200,000(6,000) (50.0%)
Other expense
6,000
Income before income tax $ 162,500 $ 134,600 $ 27,900
20.7%
Income tax
71,500
58,100
13,400
23.1%
Net income
$ 91,000 $ 76,500
$ 14,500
19.0%

Vertical Analysis
A percentage analysis can be
used to show the relationship of
each component to a total
within a single statement.

Vertical Analysis
The total, or 100% item,
on the balance sheet is
total assets.

Lincoln Company
Comparative Balance Sheet
December 31, 2006
Amount Percent

Assets
Current assets
$ 550,000
Long-term investments
95,000
Property, plant, & equip. (net)
444,500
Intangible assets
50,000
Total assets
$1,139,500
Liabilities
Current liabilities
$ 210,000
Long-term liabilities
100,000
Vertical
Analysis:
Total
liabilities
$ 310,000
Stockholders Equity
Current assets
$550,000
Preferred stock, 6%, $100 par $ 150,000 =
Totalstock,
assets
Common
$10 par $1,139,500
500,000
Retained earnings
179,500
Total stockholders equity
$ 829,500
Total liab. & SE
$1,139,500

Balance
Sheet
December
31, 2005
Amount

Percent

48.3%
8.3
39.0
4.4
100.0%

$ 533,000
177,500
470,000
50,000
$1,230,500

43.3%
14.4
38.2
4.1
100.0%

18.4%
8.8
27.2%

$ 243,000
200,000
$ 443,000

19.7%
16.3
36.0%

13.2%
48.3%

$ 150,000
500,000
137,500
$ 787,500
$1,230,500

12.2%
40.6
11.2
64.0%
100.0%

43.9
15.7
72.8%
100.0%

Lincoln Company
Comparative Balance Sheet
December 31, 2006
Amount Percent

December 31, 2005

Amount Percent

Assets
Current assets
$ 550,000
48.3%
$ 533,000 43.3%
43.3%
Long-term investments
95,000
8.3
177,500
14.4
Property, plant, & equip. (net)
444,500
39.0
470,000
38.2
Intangible assets
50,000
4.4
50,000
4.1
Total assets
$1,139,500 100.0%
$1,230,500 100.0%
Liabilities
Current liabilities
$ 210,000
18.4%
$ 243,000
19.7%
Long-term liabilities
100,000
8.8
200,000
16.3
Vertical
Analysis:27.2%
Total liabilities
$ 310,000
$ 443,000
36.0%
Stockholders Equity
Current assets
$533,000
Preferred 6% stock, $100 par $ 150,000
13.2%
$ 150,000
12.2%
= 43.3%
$1,230,500500,000
Common stock, $10 par Total assets
500,000
43.9
40.6
Retained earnings
179,500
15.7
137,500
11.2
Total stockholders equity
$ 829,500
72.8%
$ 787,500
64.0%
Total liab. & SE
$1,139,500 100.0%
$1,230,500 100.0%

Lincoln Company
Comparative Balance Sheet
December 31, 2006
Amount Percent

Assets
Current assets
Long-term investments
Property, plant, & equip. (net)
Intangible assets
Total assets
Liabilities
Current liabilities
Long-term liabilities
Total liabilities
Stockholders Equity
Preferred 6% stock, $100 par
Common stock, $10 par
Retained earnings
Total stockholders equity
Total liab. & SE

December 31, 2005

Amount Percent

$ 550,000
95,000
444,500
50,000
$1,139,500

48.3%
8.3
39.0
4.4
100.0%

$ 533,000
177,500
470,000
50,000
$1,230,500

43.3%
14.4
38.2
4.1
100.0%

$ 210,000
100,000
$ 310,000

18.4%
8.8
27.2%

$ 243,000
200,000
$ 443,000

19.7%
16.3
36.0%

$ 150,000
500,000
179,500
$ 829,500
$1,139,500

13.2%
43.9
15.7
72.8%
100.0%

$ 150,000
500,000
137,500
$ 787,500
$1,230,500

12.2%
40.6
11.2
64.0%
100.0%

Lincoln Company
Income
Comparative Income Statement
Statement
For the Years Ended December 31, 2006 and 2005
2006
2005
Amount Percent
Amount Percent
Sales
$1,530,500
102.2% $1,234,000 102.8%
Sales returns
32,500
2.2
34,000
2.8
Net sales
$1,498,000
100.0% $1,200,000 100.0%
Cost of goods sold
1,043,000
69.6
820,000 68.3
Gross profit
$ 455,000
30.4% $ 380,000 31.7%
Selling expenses
$ 191,000 Net12.8%
sales $ 147,000 12.3%
Administrative expenses
104,000
6.9
97,400
8.1
Total operating expenses
$ 295,000 is 100.0%
19.7% $ 244,400 20.4%
Income from operations
$ 160,000
10.7
$ 135,600
11.3%
Other income
8,500
0.6
11,000
0.9
$ 168,500
11.3% $ 146,600 12.2%
Other expense
6,000
0.4
12,000
1.0
Income before income tax
$ 162,500
10.9% $ 134,600
11.2%
Income tax expense
71,500
4.8
58,100
4.8
Net income
$ 91,000
6.1% $ 76,500
6.4%

Lincoln Company
Comparative Income Statement
For the Years Ended December 31, 2006 and 2005
2006
2005
Amount Percent
Amount Percent
Sales
$1,530,500
102.2% $1,234,000 102.8%
Sales returns
32,500
2.2
34,000
2.8
Net sales
$1,498,000
100.0% $1,200,000 100.0%
Cost of goods sold
1,043,000
69.6
820,000 68.3
Gross profit
$ 455,000
30.4% $ 380,000 31.7%
Selling expenses
$ 191,000
12.8% $ 147,000 12.3%
Administrative expenses
104,000
6.9
97,400
8.1
Total operating expenses
$ 295,000
19.7% $ 244,400 20.4%
Income from operations
$ 160,000
10.7
$ 135,600
11.3%
Other income
8,500
0.6
11,000
0.9
Vertical Analysis:
$ 168,500
11.3% $ 146,600 12.2%
Other expense
0.4
12,000
1.0
Selling expenses $191,0006,000
Income before income tax
$ 162,500= 12.8%
10.9% $ 134,600
11.2%
Nettax
sales
$1,498,000
Income
expense
71,500
4.8
58,100
4.8
Net income
$ 91,000
6.1% $ 76,500
6.4%

Lincoln Company
Comparative Income Statement
For the Years Ended December 31, 2006 and 2005
2006
2005
Amount Percent
Amount Percent
Sales
$1,530,500
102.2% $1,234,000 102.8%
Sales returns
32,500
2.2
34,000
2.8
Net sales
$1,498,000
100.0% $1,200,000 100.0%
Cost of goods sold
1,043,000
69.6
820,000 68.3
Gross profit
$ 455,000
30.4% $ 380,000 31.7%
Selling expenses
$ 191,000
12.8% $ 147,000 12.3%
Administrative expenses
104,000
6.9
97,400
8.1
Total operating expenses
$ 295,000
19.7% $ 244,400 20.4%
Income from operations
$ 160,000
10.7
$ 135,600
11.3%
Other income
8,500
0.6
11,000
0.9
$ 168,500
11.3% $ 146,600 12.2%
Other expense
6,000
0.4
12,000
1.0
Income before income tax
$ 162,500
10.9% $ 134,600
11.2%
Income tax expense
71,500
4.8
58,100
4.8
Net income
$ 91,000
6.1% $ 76,500
6.4%

Lincoln Company
Comparative Income Statement
For the Years Ended December 31, 2006 and 2005
2006
2005
Amount Percent
Amount Percent
Sales
$1,530,500
102.2% $1,234,000 102.8%
Sales returns
32,500
2.2
34,000
2.8
Net sales
$1,498,000
100.0% $1,200,000 100.0%
Cost of goods sold
1,043,000
69.6
820,000 68.3
Gross profit
$ 455,000
30.4% $ 380,000 31.7%
Selling expenses
$ 191,000
12.8% $ 147,000 12.3%
Administrative expenses
104,000
6.9
97,400
8.1
Total operating expenses
$ 295,000
19.7% $ 244,400 20.4%
Income from operations
$ 160,000
10.7
$ 135,600
11.3%
Other income
8,500
0.6
11,000
0.9
$ 168,500
11.3% $ 146,600 12.2%
Other expense
6,000
0.4
12,000
1.0
Income before income tax
$ 162,500
10.9% $ 134,600
11.2%
Income tax expense
71,500
4.8
58,100
4.8
Net income
$ 91,000
6.1% $ 76,500
6.4%

Common Size Statements

Vertical analysis with both dollar and
percentage amounts is also useful in
comparing one company with another or
with industry averages. Such
comparisons are easier to make with the
use of common-size statements in
which all items are expressed in
percentages.

Common-Size Income Statement

RATIO
ANALYSIS

Solvency Analysis
Solvency is the ability of a business to
meet its financial obligations (debts) as
they are due.
Solvency analysis focuses on the ability
of a business to pay or otherwise
satisfy its current and noncurrent
liabilities.
This ability is normally assessed by
examining balance sheet relationships.

Current Position Analysis

Working Capital and Current Ratio
Current assets
Current liabilities
Working capital
Current ratio

2006
$550,000
210,000
$340,000
2.6

2005
$533,000
243,000
$290,000
2.2

Use: To indicate the abilityDivide

to meet
currently maturing obligations.
current
assets by
current
liabilities

Current Position Analysis

Quick Ratio
Quick assets:
Cash
Marketable securities
Accounts receivable (net)
Total
Current liabilities
Quick ratio

2006

2005

$ 90,500
75,000
115,000
$280,500
$210,000
1.3

$ 64,700
60,000
120,000
$244,700
$243,000
1.0

Use: To indicate instant debt-paying ability.

Accounts Receivable Analysis

Accounts Receivable Turnover
Net sales on account
Accounts receivable (net):
Beginning of year
End of year
Total
Average (Total 2)

2006
$1,498,000

2005
$1,200,000

$ 120,000
115,500
$ 235,000
$ 117,500

$ 140,000
120,000
$ 260,000
$ 130,000

Net sales on account

Average accounts
receivable

Accounts Receivable Analysis

Accounts Receivable Turnover
Net sales on account
Accounts receivable (net):
Beginning of year
End of year
Total
Average
Accounts receivable turnover

2006
$1,498,000

2005
$1,200,000

$ 120,000
115,500
$ 235,000
$ 117,500
12.7

$ 140,000
120,000
$ 260,000
$ 130,000
9.2

Use: To assess the efficiency in collecting

receivables and in the management of credit.

Accounts Receivable Analysis

Number of Days Sales in Receivables
2006
Accounts receivable (net),
end of year
Net sales on account
Average daily sales on
account (sales 365)

2005

$ 115,000
$1,498,000

$ 120,000
$1,200,000

4,104

Accounts receivable, end of year

Average daily sales on account

3,288

Accounts Receivable Analysis

Number of Days Sales in Receivables
2006
Accounts receivable (net),
end of year
Net sales on account
Average daily sales on
account (sales 365)

Number of days sales in

receivables

2005

$ 115,000
$1,498,000

$ 120,000
$1,200,000

4,104
28.0

3,288
36.5

Use: To assess the efficiency in collecting

receivables and in the management of credit.

Inventory Analysis
Inventory Turnover
Cost of goods sold
Inventories:
Beginning of year
End of year
Total
Average (Total 2)

Inventory turnover =

2006
$1,043,000

2005
$ 820,000

$ 283,000
264,000
$ 547,000
$ 273,500

$ 311,000
283,000
$ 594,000
$ 297,000

Cost of goods sold

Average inventory

Inventory Analysis
Inventory Turnover
Cost of goods sold
Inventories:
Beginning of year
End of year
Total
Average (Total 2)
Inventory turnover

2006
$1,043,000

2005
$ 820,000

$ 283,000
264,000
$ 547,000
$ 273,500
3.8

$ 311,000
283,000
$ 594,000
$ 297,000
2.8

Use: To assess the efficiency in the

management of inventory.

Inventory Analysis
Number of Days Sales in Inventory
Inventories, end of year
Cost of goods sold
Average daily cost of
goods sold
(COGS 365)

Number of
Days Sales =
in Inventory

2006
$ 264,000
$1,043,000

2005
$283,000
$820,000

2,858

2,247

Inventories, end of year

Average daily cost of goods sold

Inventory Analysis
Number of Days Sales in Inventory
Inventories, end of year
Cost of goods sold
Average daily cost of
goods sold
(COGS 365)
Number of days sales
in inventory

2006
$ 264,000
$1,043,000

2005
$283,000
$820,000

2,858
92.4

Use: To assess the efficiency in the

management of inventory.

2,247
125.9

Long-Term Creditors
Ratio of Fixed Assets to Long-Term Liabilities

Fixed assets (net)

Long-term liabilities
Ratio of fixed assets to
long-term liabilities

2006
$444,500
$100,000

2005
$470,000
$200,000

4.4

2.4

Use: To indicate the margin of safety

to long-term creditors.

Long-Term Creditors
Ratio of Liabilities to Stockholders Equity
Total liabilities
Total stockholders equity
Ratio of liabilities to
stockholders equity

2006
$310,000
$829,500

2005
$443,000
$787,500

0.37

0.56

Use: To indicate the margin of safety to

creditors.

Long-Term Creditors
Number of Times Interest Charges Earned
Income before income tax
Add interest expense
Amount available for interest

Number of
Times Interest =
Charges Earned

2006
2005
$ 900,000 $ 800,000
300,000
250,000
$1,200,000 $1,050,000

Income before
income tax + interest expense
Interest expense

Long-Term Creditors
Number of Times Interest Charges Earned
Income before income tax
Add interest expense
Amount available for interest
Number of times earned

2006
2005
$ 900,000 $ 800,000
300,000
250,000
$1,200,000 $1,050,000
4.0

Use: To assess the risk to debtholders in

terms of number of times interest
charges were earned.

4.2

Profitability Analysis
Profitability is the ability of an entity to
earn profits.
This ability to earn profits depends on the
effectiveness and efficiency of operations
as well as resources available.
Profitability analysis focuses primarily on
the relationship between operating results
reported in the income statement and
resources reported in the balance sheet.

The Common Stockholder

Ratio of Net Sales to Assets
Net sales
Total assets:
Beginning of year
End of year
Total
Average (Total 2)

2006
$1,498,000

2005
$1,200,000

$1,053,000
1,044,500
$2,097,500
$1,048,750

$1,010,000
1,053,000
$2,063,000
$1,031,500

Excludes long-term investments

The Common Stockholder

Ratio of Net Sales to Assets
Net sales
Total assets:
Beginning of year
End of year
Total
Average (Total 2)
Ratio of net sales to assets

2006
$1,498,000

2005
$1,200,000

$1,053,000
1,044,500
$2,097,500
$1,048,750

$1,010,000
1,053,000
$2,063,000
$1,031,500

1.4

Use: To assess the effectiveness of

the use of assets.

1.2

The Common Stockholder

Rate Earned on Total Assets
Net income
Plus interest expense
Total
Total assets:
Beginning of year
End of year
Total
Average (Total 2)
Rate earned on total assets

2006
$ 91,000
6,000
$ 97,000

2005
$ 76,500
12,000
$ 88,500

$1,230,500
1,139,500
$2,370,000
$1,185,000
8.2%

$1,187,500
1,230,500
$2,418,000
$1,209,000
7.3%

Use: To assess the profitability of the assets.

The Common Stockholder

Rate Earned on Stockholders Equity
Net income
Stockholders equity:
Beginning of year
End of year
Total
Average (Total 2)
Rate earned on stockholders
equity

2006
$ 91,000

2005
$ 76,500

$ 787,500
829,500
$1,617,000
$ 808,500

$ 750,000
787,500
$1,537,500
$ 768,750

11.3%

10.0%

Use: To assess the profitability of the

investment by stockholders.

The Common Stockholder

Rate Earned on Common Stockholders Equity
Net income
Less preferred dividends
Remaindercommon stock
Common stockholders equity:
Beginning of year
End of year
Total
Average (Total 2)

$
$

2006
91,000
9,000
82,000

$ 637,500
679,500
$1,317,000
$ 658,500

$
$

2005
76,500
9,000
67,500

$ 600,000
637,500
$1,237,500
$ 618,750

The Common Stockholder

Rate Earned on Common Stockholders Equity
Net income
Less preferred dividends
Remaindercommon stock
Common stockholders equity:
Beginning of year
End of year
Total
Average (Total 2)
Rate earned on common
stockholders equity

$
$

2006
91,000
9,000
82,000

$
$

2005
76,500
9,000
67,500

$ 637,500
679,500
$1,317,000
$ 658,500

$ 600,000
637,500
$1,237,500
$ 618,750

12.5%

10.9%

Use: To assess the profitability of the

investment by common stockholders.

The Common Stockholder

Earnings Per Share on Common Stock
Net income
Less preferred dividends
Remaindercommon stock
Shares of common stock
Earnings per share on common stock

2006
$ 91,000
9,000
$ 82,000
50,000
$1.64

2005
$ 76,500
9,000
$ 67,500
50,000
$1.35

Use: To assess the profitability of the

investment by common stockholders.

The Common Stockholder

Price-Earnings Ratio
2006
Market price per share of common
$41.00
Earnings per share on common
1.64
Price-earnings ratio on common stock
25

2005
$27.00
1.35
20

Use: To indicate future earnings

prospects, based on the relationship
between market value of common
stock and earnings.

The Common Stockholder

Dividend Yield on Common Stock
Dividends per share of common
Market price per share of common
Dividend yield on common stock

2006
$ 0.80
41.00
1.95%

2005
$ 0.60
27.00
2.22%

Use: To indicate the rate of return to common

stockholders in terms of dividends.

Corporate Annual Reports

In addition to financial statements, the annual
report includes a management discussion analysis
(MDA) and an independent auditors report.

The MDA includes an analysis of the results of

operations and discusses managements
opinion about future performance. It
compares the prior years income statement
with the current years. It also contains an
analysis of the firms financial condition.

Corporate Annual Reports

In addition to financial statements, the annual
report includes a management discussion analysis
(MDA) and an independent auditors report.

Before issuing annual statements, all

publicly held corporations are required
to have an independent audit of their
financial statements. The CPAs who
conduct the audit render an opinion as
to the fairness of the statements.