Part I As a new accountant, you have been assigned to your firm’s client, Jim’s Auto Body. Jim’s Auto Body is a relatively new company of 2 years. To help the client understand the company’s...

Horizontal analysis:
Under horizontal analysis, the figures of previous year are compared to current year and the increase or decrease in items of income statement and balance sheet is analyzed. In the case of the organization, in year 2017 the service revenue has been increased by 12.50% whereas the net profit has been increased by 5.48%. It shows that the expenditures have been increased by more percentage which are higher than increase in service revenue. In year 2017, the expenses have been increased by 43.02% and the increase in expenses ratio with higher margin has been resulted increase in net profit with lower margin as compared to other factors. The major increase in expenses in on account of 157% increase in utility expenses and 47% increase in salary expenses. In year 2017, the assets have been increased by 35.36%. The accounts receivables have been increased by 70% whereas depreciation has been increased by 50%. Further supplies have been reduced by approximately 12% which have reduced the impact of increase in assets (Alicia Tuovila, 2020). The liabilities have been increased by 140% in current year which is not a positive indicator for the organization because the significant increase in liabilities as compared to assets may be resulted into decline in solvency and liquidity position of the organization. The equity has been increased by 28.49% only which is also lower than increase in assets. It shows that the assets in current year are financed majorly from liabilities not equity and which is not a healthy indicator.
Vertical analysis:
Under vertical analysis, in income statement the income is considered as base and the expenses are compared as a percentage of revenue in each year independently. In balance sheet, the total assets are taken as base and each item of balance sheet is analyzed as a percentage total asset in each year independently. In the case, in year 2016, total expenses are 23.78% of sales and net profit is 76.22% of sales revenue. In the case, in year 2017, total expenses are 39.01% of sales and net profit is 60.99% of sales revenue. The major expenses are salary expenses which are 13.06% and 24.77% in year 2016 and 2017 respectively. It shows that the company has earned net income as major portion from revenue and expenses are on lower side which is a healthy indicator for the organization in terms of profitability. In balance sheet, Cash is...