# XACC 280 Week 7 CheckPoint - Ratio, Vertical, and Horizontal Analyses

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. 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
o The current ratio for 2005
o The Current Ratio for 2004
o 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
o Two measures of Horizontal analysis – for example, compute the total change in assets by percentage, by taking current assets in 2005 subtracting current assets 2004 and dividing by current asset in 2004. Compute similar percentage for current liabilities
• Examine The Coca-Cola Company’s Consolidated Balance Sheet on p. B2 in Appendix B of Financial Accounting, especially its current assets in 2005 by current assets in 2004. Compute a similar percentage for current liabilities
• Calculate the following for Coca-Cola and show your work
o The current ratio for 2005
o The Current Ratio for 2004
o 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
o Two measures of Horizontal analysis – for example, compute the total change in assets by percentage, by taking current assets in 2005 subtracting current assets 2004 and dividing by current asset in 2004. Compute similar percentage for current liabilities
• Post your explanation and calculations as an attachment

The financial statement analysis of a company involves three characteristics of a company; their liquidity, profitability, and solvency. In order to determine these characteristics of a company, there are three tools used; the ratio analysis, vertical analysis, and the horizontal analysis. The ratio analysis is used to express “the relationship among selected items of financial statement data” (Weygandt, Kimmel, & Kieso, 2008). This analysis can be used to measure a company’s liquidity ratio, profitability ratio, or their solvency ratio. The ratios help us determine some conditions of a company that may not always be apparent when looking at the company’s financial statements.