XACC 280 Week 7 Checkpoint-Ratio Vertical and Horizontal Analyses

1. CheckPoint: Ratio, Vertical, and Horizontal Analyses

The calculations you perform for this CheckPoint form the basis of your analysis of your capstone project.

• Write in 100 to 200 words an explanation of the three tools of financial statement analysis and the function of each.

• Examine PepsiCo, Inc.’s Consolidated Balance Sheet on p. A6 in Appendix A of Financial Accounting, especially its Current Assets, Current Liabilities, and Total Assets for years 2005 and 2004.

• Calculate the following for PepsiCo, Inc. and show your work:

• The Current Ratio for 2005
• The Current Ratio for 2004
• Two measures of vertical analysis—for example, compute the current assets divided by total assets for each year, and express your result as a percentage
• Two measures of horizontal analysis—for example, compute the total change in assets by percentage, by dividing current assets in 2005 by current assets in 2004. Compute a similar percentage for current liabilities
• Post your explanation and calculations.