Presented below is selected data from the financial statements of Horizons, Inc. for the current and prior year:

 	
12/31/20X2

12/31/20X1

Current assets

$330,000

$220,000

Total assets

$2,300,000

$1,950,000

Current liabilities

$195,000

$180,000

Total liabilities

$1,190,000

$1,180,000

Total stockholders' equity

$1,110,000

$770,000

Net sales

$5,200,000

$3,900,000

Cost of Goods Sold

$3,800,000

$2,690,000

Wages expense

$953,000

$869,000

Supplies expense

$60,000

$50,000

Depreciation expense

$35,000

$32,000

Interest expense

$12,000

$9,000

Net income

$340,000

$250,000

A horizontal analysis of the balance sheet would show (select all that apply):

	A.	
Total stockholders' equity increased 44.16 % from 20X1 to 20X2 .

	B.	
Net income increased 36% from 20X1 to 20X2.

	C.	
The debt ratio for 20X2 is 51.74%.

	D.	
Current assets increased 50% from 20X1 to 20X2

	E.	
Total assets increased 17.95% from 20X1 to 20X2.

To perform a horizontal analysis, we calculate the percentage change from one year to the next using the formula:

\[
\text{Percentage Change} = \left( \frac{\text{Current Year} - \text{Prior Year}}{\text{Prior Year}} \right) \times 100
\]

Let's evaluate each statement:

### **A. Total stockholders' equity increased 44.16% from 20X1 to 20X2**
\[
\text{Percentage Change} = \left( \frac{1,110,000 - 770,000}{770,000} \right) \times 100 = \left( \frac{340,000}{770,000} \right) \times 100 = 44.16\%
\]
**This statement is correct.**

### **B. Net income increased 36% from 20X1 to 20X2**
\[
\text{Percentage Change} = \left( \frac{340,000 - 250,000}{250,000} \right) \times 100 = \left( \frac{90,000}{250,000} \right) \times 100 = 36\%
\]
**This statement is correct.**

### **C. The debt ratio for 20X2 is 51.74%**
The debt ratio is calculated as:
\[
\text{Debt Ratio} = \frac{\text{Total Liabilities}}{\text{Total Assets}} \times 100
\]
For 20X2:
\[
\text{Debt Ratio} = \frac{1,190,000}{2,300,000} \times 100 = 51.74\%
\]
**This statement is correct.**

### **D. Current assets increased 50% from 20X1 to 20X2**
\[
\text{Percentage Change} = \left( \frac{330,000 - 220,000}{220,000} \right) \times 100 = \left( \frac{110,000}{220,000} \right) \times 100 = 50\%
\]
**This statement is correct.**

### **E. Total assets increased 17.95% from 20X1 to 20X2**
\[
\text{Percentage Change} = \left( \frac{2,300,000 - 1,950,000}{1,950,000} \right) \times 100 = \left( \frac{350,000}{1,950,000} \right) \times 100 = 17.95\%
\]
**This statement is correct.**

### Conclusion:
The correct statements are:
- **A. Total stockholders' equity increased 44.16%.**
- **B. Net income increased 36%.**
- **C. The debt ratio for 20X2 is 51.74%.**
- **D. Current assets increased 50%.**
- **E. Total assets increased 17.95%.**

Would you like further details or have any questions?

### 5 related questions:
1. How do we calculate the debt-to-equity ratio, and what is Horizons, Inc.'s ratio for 20X2?
2. What impact would a higher current assets percentage have on liquidity?
3. How does the increase in net income compare to the increase in total sales?
4. What does a 44.16% increase in stockholders' equity indicate about the company's performance?
5. How does horizontal analysis differ from vertical analysis?

### Tip:
When analyzing financial data, compare both percentage changes and absolute values to get a clearer picture of a company's growth or decline.

Presented below is selected data from the financial statements of Horizons, Inc. for the current and prior year:

12/31/20X2

12/31/20X1

Current assets

$330,000

$220,000

Total assets

$2,300,000

$1,950,000

Current liabilities

$195,000

$180,000

Total liabilities

$1,190,000

$1,180,000

Total stockholders' equity

$1,110,000

$770,000

Net sales

$5,200,000

$3,900,000

Cost of Goods Sold

$3,800,000

$2,690,000

Wages expense

$953,000

$869,000

Supplies expense

$60,000

$50,000

Depreciation expense

$35,000

$32,000

Interest expense

$12,000

$9,000

Net income

$340,000

$250,000

A horizontal analysis of the balance sheet would show (select all that apply):

A. Total stockholders' equity increased 44.16 % from 20X1 to 20X2 .

B. Net income increased 36% from 20X1 to 20X2.

C. The debt ratio for 20X2 is 51.74%.

D. Current assets increased 50% from 20X1 to 20X2.

E. Total assets increased 17.95% from 20X1 to 20X2.

Analyze the financial statements of Horizons, Inc. with a horizontal analysis, covering percentage changes in stockholders' equity, net income, current assets, and more. Learn key concepts like debt ratio and percentage change.

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