I have attached the balance sheet and income statements for Rands Disk Storage. I need you to answer...

Question

I have attached the balance sheet and income statements for Rands Disk Storage. I need you to answer the four questions regarding the presented information.

Robert · Accepted Answer

Rand's Disk Storage 
 
1. Does the horizontal analysis indicate anything unusual about Rand's 
Disk storage, Inc.? If so please explain. 
 
 Cost of Sales is not increased in proportion to Sales. – Sales 
has increased by 62.23%, whereas the cost of sales has 
increased by only 23.77%. Normally these two should 
increase by same percentage. 
 
 Gross profit increased by 1773% - This is an abnormal 
increase. 
 
 Sales increase by 62%, whereas Accounts receivable 
increased by 148%. – The increase percentage is having 
very wide difference. It seems that collections have been 
postponed, to increase the sales. 
  
 Cost of sales increased by 24%, whereas Accounts payable 
increased by 204%. Accounts payable has not been paid,

I have attached the balance sheet and income statements for Rands Disk Storage. I need you to answer the four questions regarding the presented information.

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