Vacuum Analytics Case
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Salve Regina University *
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ACC-101-06
Subject
Finance
Date
Apr 3, 2024
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xlsx
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3
Uploaded by MegaExploration11252
The Vacuum Company, Inc.
The Vacuum Company was engaged in manufactuing and marketing various household items, such as vacuum vacuum cleaners and whirlpools.
The Company's financial statements and selected ratios are on the following two tabs.
Use these financial statements to answer the following questions:
1) Prepare a vertical analysis on the financial statements. (use the Balance Sheet and Income Statement Tabs)
2) Based on the results of question #1, what relationships appear to be out of alignment?
3) Is the relationship between sales and cost of goods sold linear?
4) Should the relationship between sales and cost of goods sold be linear?
If so, why? If not, why not?
5) Can you identify the potential fraud?
If yes, how did you determine that there was a potential fraud?
If not, what other information would help determine if there is a potential fraud?
Practical Problem # 1
The Vacuum Company, Inc.
Audited
Audited
Audited
BALANCE SHEET (in thousands)
2 years prior
1 year prior
current
ASSETS
Cash
63 0.15%
514 885 Accounts Receivable
14,402 33.34%
27,801 51,076 Inventories
9,762 22.60%
19,577 39,135 Other Current Assets
708 1.64%
1,449 3,015 Total Current Assets
24,935 57.72%
49,341 94,111 Fixed Assets
19,523 45.190%
19,736 27,884 Accum Depreciation
(3,140)
-7.268%
(4,948)
(6,336)
Other Assets
1,884 4.361%
1,112 2,481 TOTAL ASSETS
43,202 100.000%
65,241 118,140 LIABILITIES & EQUITY
Lines of Credit
2,707 6.3%
0 0 curr portion LT Debt
0 0.0%
900 1,250 Accounts Payable
7,344 17.0%
15,072 13,288 Accrued Liabilities
3,127 7.2%
5,468 4,710 Income Taxes Payable
1,554 3.6%
2,619 3,782 Total Current Liabilities
14,732 34.1%
24,059 23,030 Bonds Payable
14,800 34.3%
13,900 14,625 Bank Debt
0 0.0%
5,941 47,432 Deferred Income Taxes
685 1.6%
1,254 1,881 TOTAL LIABILITIES
30,217 69.9%
45,154 86,968 Common Stock
1 0.0%
1 1 Add'l paid in Capital
8,010 18.5%
8,018 8,023 Retained Earnings
5,210 12.1%
12,315 23,269 Currency Adjustments
0 0.0%
0 126 Treasury Stock
(236)
-0.5%
(247)
(247)
TOTAL LIABILITIES & EQUITY
43,202 100.0%
65,241 118,140
Practical Problem # 1
The Vacuum Company, Inc.
STATEMENTS OF INCOME (IN THOUSANDS)
Audited
Audited
Audited
2 years prior
1 year prior
current
Net Sales
$ 76,144 100.0%
$ 128,234 $ 181,123 Costs of Goods Sold
46,213 60.7%
70,756 94,934 Gross Margin
29,931 39.3%
57,478 86,189 General Expenses
20,105 26.4%
42,600 64,285 Operating Income
9,826 12.9%
14,878 21,904 Interest Expense
1,930 2.5%
1,584 3,189 Income Taxes
3,807 5.0%
6,189 7,761 Net Income
$ 4,089 5.4%
$ 7,105 $ 10,954 Earnings per share
$ 0.46 $ 0.78 $ 1.21 BALANCE SHEET RATIOS
Current Ratio
1.693
2.051
4.086
Quick Ratio
0.982
1.177
2.256
Days Sales in AR
69.037
79.132
102.929
Asset Turnover
2.365
1.975
Day's Sales in Inventory
77.102
75.674
112.867
Debt/Equity Ratio
2.327
2.248
2.79
OPERATIONS RATIOS
Receivables Turnover
5.287
4.613
3.546
Inventory Turnover
4.734
4.823
3.234
Times Interest Earned
2.119
4.485
3.435
COGS/Sales
60.69%
55.18%
52.41%
Gross Margin %
39.31%
44.82%
47.59%
Return on Equity
31.49%
35.37%
35.14%
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Year 4
Year 3
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215,000
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Inventories
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