The condensed financial statements of Leeward Corporation for 2006 and 2005 are presented below. Leeward Corporation Leeward Corporation Balance Sheet Income Statement December 31, 2006 For the Year Ended December 31, 2006 Assets Revenues $2,500,000 Current assets Expenses Cash and temporary Cost of goods sold 1,080,000 investments $ 50,000 Selling and administrative Accounts receivable 70,000 expenses 495,000 Inventories 120,000 Interest expense 30,000 Total current assets 240,000 Total expenses 1,605,000 Property, plant, and Income before income taxes 895,000 equipment (net) 780,000 Income tax expense 268,500 Total assets $1,020,000 Net income $ 626,500 Liabilities and Stockholders' Equity Current liabilities $ 100,000 Long-term liabilities 300,000 Common stockholders' equity 620,000 Total liabilities and stockholders' equity $1,020,000 Leeward Corporation Leeward Corporation Balance Sheet Income Statement December 31, 2005 For the Year Ended December 31, 2005 Assets Revenues $2,500,000 Current assets Expenses Cash and temporary Cost of goods sold 1,750,000 investments $ 40,000 Selling and administrative Accounts receivable 90,000 expenses 500,000 Inventories 150,000 Interest expense 30,000 Total current assets 280,000 Total expenses 2,280,000 Property, plant, and Income before income taxes 220,000 equipment (net) 800,000 Income tax expense 66,000 Total assets $1,080,000 Net income $ 154,000 Liabilities and Stockholders' Equity Current liabilities $ 140,000 Long-term liabilities 320,000 Common stockholders' equity 620,000 Total liabilities and stockholders' equity $1,080,000 Instructions Compute the following listed ratios for 2006. (a) Current ratio = ___________________________________________________________ . (b) Debt to total assets = _____________________________________________________ . (c) Profit margin ratio = ______________________________________________________ . (d) Return on common stockholders' equity = ____________________________________ . (e) Return on assets = _______________________________________________________ . Perform horizontal analysis on both the balance sheet and income statement. Leeward Corporation Balance Sheet Horizontal Analysis 2006 2005 Change Percent Assets Cash and temporary investments $50,000 $40,000 Accounts receivable $70,000 $90,000 Inventories $120,000 $150,000 Total current assets $240,000 $280,000 Property, plant and equipment $780,000 $800,000 Total assets $1,020,000 $1,080,000 Liabilities & Stockholder’s Equity Current liabilities $100,000 $140,000 Long-term liabilities $300,000 $320,000 Common stockholder’s equity $620,000 $620,000 Total liabilities and stockholder’.

1. The condensed financial statements of Leeward Corporation for
2006 and 2005 are presented below.
Leeward Corporation
Leeward Corporation
Balance Sheet
Income Statement
December 31, 2006
For the Year Ended December 31, 2006
Assets
Revenues
$2,500,000
Current assets
Expenses

2. Cash and temporary
Cost of goods sold
1,080,000
investments
$
50,000
Selling and administrative
Accounts receivable
70,000
expenses
495,000
Inventories
120,000
Interest expense

3. 30,000
Total current assets
240,000
Total expenses
1,605,000
Property, plant, and
Income before income taxes
895,000
equipment (net)
780,000
Income tax expense
268,500
Total assets

4. $1,020,000
Net income
$
626,500
Liabilities and Stockholders' Equity
Current liabilities
$
100,000
Long-term liabilities
300,000
Common stockholders' equity
620,000
Total liabilities and
stockholders' equity

5. $1,020,000
Leeward Corporation
Leeward Corporation
Balance Sheet
Income Statement
December 31, 2005
For the Year Ended December 31, 2005
Assets
Revenues
$2,500,000

6. Current assets
Expenses
Cash and temporary
Cost of goods sold
1,750,000
investments
$
40,000
Selling and administrative
Accounts receivable
90,000
expenses
500,000
Inventories
150,000

7. Interest expense
30,000
Total current assets
280,000
Total expenses
2,280,000
Property, plant, and
Income before income taxes
220,000
equipment (net)
800,000
Income tax expense
66,000

8. Total assets
$1,080,000
Net income
$
154,000
Liabilities and Stockholders' Equity
Current liabilities
$
140,000
Long-term liabilities
320,000
Common stockholders' equity
620,000
Total liabilities and

9. stockholders' equity
$1,080,000

10. Instructions
Compute the following listed ratios for 2006.

11. (a)
Current ratio =
_____________________________________________________
______
.
(b)
Debt to total assets =
_____________________________________________________
.
(c)
Profit margin ratio =
_____________________________________________________
_
.
(d)
Return on common stockholders' equity =
____________________________________
.
(e)

12. Return on assets =
_____________________________________________________
__
.
Perform horizontal analysis on both the balance sheet and
income statement.
Leeward Corporation
Balance Sheet
Horizontal Analysis
2006
2005
Change
Percent
Assets

13. Cash and temporary investments
$50,000
$40,000
Accounts receivable
$70,000
$90,000
Inventories
$120,000
$150,000
Total current assets
$240,000
$280,000
Property, plant and equipment
$780,000
$800,000
Total assets
$1,020,000
$1,080,000

14. Liabilities & Stockholder’s Equity
Current liabilities
$100,000
$140,000
Long-term liabilities
$300,000
$320,000
Common stockholder’s equity
$620,000
$620,000
Total liabilities and
stockholder’s equity
$1,020,000
$1,080,000

15. Leeward Corporation
Income Statement
Horizontal Analysis

16. 2006
2005
Change
Percent
Revenues
$2,500,000
$2,500,000
Expenses
Cost of goods sold
$1,080,000
$1,750,000
Selling & administrative expense
$495,000
$500,000
Interest expense
$30,000
$30,000
Total Expenses
$1,605,000

17. $2,280,000
Income before income taxes
$895,000
$220,000
Income tax expense
$268,500
$66,000
Net Income
$626,500
$154,000
Perform vertical analysis on both the balance sheet and income
statement for 2005 and 2006.

18. Leeward Corporation
Balance Sheet
Vertical Analysis
2006
2005
Amount
Percent
Amount
Percent
Assets
Cash and temporary investments
$50,000
$40,000
Accounts receivable
$70,000
$90,000
Inventories
$120,000

19. $150,000
Total current assets
$240,000
$280,000
Property, plant and equipment
$780,000
$800,000
Total assets
$1,020,000
$1,080,000
Liabilities & Stockholder’s Equity
Current liabilities
$100,000
$140,000
Long-term liabilities

20. $300,000
$320,000
Common stockholder’s equity
$620,000
$620,000
Total liabilities and
stockholder’s equity
$1,020,000
$1,080,000
Leeward Corporation

21. Income Statement
Vertical Analysis
2006
2005
Amount
Percent
Amount
Percent
Revenues
$2,500,000
$2,500,000
Expenses
Cost of goods sold
$1,080,000
$1,750,000
Selling & administrative expense
$495,000

22. $500,000
Interest expense
$30,000
$30,000
Total Expenses
$1,605,000
$2,280,000
Income before income taxes
$895,000
$220,000
Income tax expense
$268,500
$66,000
Net Income
$626,500
$154,000

23. Assess the financial performance of Leeward, using your
analysis in #2 and #3 above. How have things changed from
2005 to 2006?

24. If the company wanted to perform industry comparison analysis,
what references would you recommend it use?