Comparative Financial Statement Analysis

Financial Statement Analysis For Small Businesses A Resource Guide Provided By Virginia Small Business Development Center Network (Revised for the VSBDC by Henry Reeves 3/22/2011) Contents Topic Page Introduction 3 Importance of Financial Statements 4 Collecting and Managing Data 5 The Income Statement 7 The Balance Sheet 9 Reconciliation of Equity or Statement of Changes in Stockholder Equity 12 Statement of Cash Flows 12 Notes to Financial Statements 13 Financial Ratios Explanation 13 Key Terms and Concepts 20 Financial Statements as a Management Tool 24 Three Case Studies 32 Figure 1: Summary Table of Financial Ratios 36 Figure 2: K-L Fashions, Inc.. Financial Statements Income Statement For the year ended January 31: (Dollars in thousands) 2005 2004 2003 2002 Net Sales 6,039,750 5,452,010 4,558,060 3,362,910 Cost of Goods 3,573,070 3,135,730 2,616,710 1,903,480 Gross Profit 2,466,680 2,316,280 1,941,350 1,459,430 Selling, General and Administrative Expenses (including depreciation) 2,221,540 1,849,100 1,434,860 1,076,990 Income from Operations 245,140 467,180 506,490 382,440 Other Income (expenses): Interest and other income 14,470 19,510 27,250 14,410 Interest Expense (10,180) (13,990) (12,320) (13,570) Income Before Income Taxes 249,430 472,700 521,420 383,280 Income Tax Provision 102,000 181,990 198,600 162,080 Net Income 147,430 290,710 322,820 221,200 (As a Percentage of Sales) Net Sales 100.0 100.0 100.0 100.0 Cost of Goods 59.2 57.5 57.4 56.6 Gross Profit 40.8 42.5 42.6 43.4 Selling, General and Administrative Expenses (including depreciation) 36.8 33.9 31.5 32.0 Income from Operations 4.0 8.6 11.1 11.4 Other Income (expenses): Interest and other income .3 .4 .6 .4 Interest Expense (.2) (.3) (.3) (.4) Income Before Income Taxes 4.1 8.7 11.4 11.4 Income Tax Provision 1.7 3.4 4.3 4.8 Net Income 2.4 5.3 7.1 6.6 Figure 2.. Financial Statements Balance Sheet January 31: (Dollars in thousands) 2005 2004 2003 2002 Assets Current Assets: Cash an