based on the veritcal and horizontal analysis of income statement ONLY, what are possobilities or fraud or any illegal actions.

based on the veritcal and horizontal analysis of income statement ONLY, what are possobilities or fraud or any illegal actions.

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ABC Healthcare Equipment Company
Unaudited Financial Statements
(000’s Omitted)
Income Statement
Horizontal Analysis
Year Ended
Change
July 31, 2007 July 31, 2008
Dollars
Percent
Gross Sales
$50,000
$75,000
$25,000
50.00
Sales Returns & Allowances
$200
$210
$10
5.00
Net Sales
$49,800
$74,790
$24,990
50.18
Beginning Inventory
$8,000
$18,750
$10,750
134.38
Purchases
$25,000
$37,500
$12,500
50.00
Ending Inventory
$18,750
$27,500
$8,750
46.67
Cost of Goods Sold
$14,250
$28,750
$14,500
101.75
Gross Margin
$35,550
$46,040
$10,490
29.51
G & A Expenses
Advertising
$4,000
$3,500
$(500)
(12.50)
Contract Labor
$2,400
$4,250
$1,850
77.08
Depreciation
$200
$180
$(20)
(10.00)
Equipment Rental
$13
$13
$-

Labor
$3,000
$2,500
$(500)
(16.67)
Legal & Accounting
$1,000
$1,200
$200
20.00
Other
$600
$800
$200
33.33
Sales Taxes
$990
$825
$(165)
(16.67)
Total G & A Expenses
$12,203
$13,268
$1,065
8.73
Net Income Before Taxes
$23,347
$32,772
$9,425
40.37
Income Taxes
$7,938
$11,142
$3,205
40.37
Net Income After Taxes
$15,409
$21,630
$6,221
40.37
Earnings Per Share
$154.09
$216.30
$62
40.37

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ABC Healthcare Equipment Company
Unaudited Financial Statements
(000’s Omitted)
Income Statement
Vertical Analysis
Year Ended
Percent of Total Net Sales
July 31, 2007 July 31, 2008 July 31, 2009
2007
2008
2009
Gross Sales
$50,000
$75,000
$147,000
100.40%
100.28%
100.16%
Sales Returns & Allowances
$200
$210
$230
0.40%
0.28%
0.16%
Net Sales
$49,800
$74,790
$146,770
100.00%
100.00%
100.00%
Beginning Inventory
$8,000
$18,750
$27,500
16.06%
25.07%
18.74%
Purchases
$25,000
$37,500
$73,500
50.20%
50.14%
50.08%
Ending Inventory
$18,750
$27,500
$26,675
37.65%
36.77%
18.17%
Cost of Goods Sold
$14,250
$28,750
$74,325
28.61%
38.44%
50.64%
Gross Margin
$35,550
$46,040
$72,445
G & A Expenses
Advertising
$4,000
$3,500
$2,950
8.03%
4.68%
2.01%
Contract Labor
$2,400
$4,250
$3,500
4.82%
5.68%
2.38%
Depreciation
$200
$180
$160
0.40%
0.24%
0.11%
Equipment Rental
$13
$13
$13
0.03%
0.02%
0.01%
Labor
$3,000
$2,500
$2,750
6.02%
3.34%
1.87%
Legal & Accounting
$1,000
$1,200
$1,050
2.01%
1.60%
0.72%
Other
$600
$800
$1,098
1.20%
1.07%
0.75%
Sales Taxes
$990
$825
$1,361
1.99%
1.10%
0.93%
Total G & A Expenses
$12,203
$13,268
$12,882
24.50%
17.74%
8.78%
Net Income Before Taxes
$23,347
$32,772
$59,563
46.88%
43.82%
40.58%
Income Taxes
$7,938
$11,142
$20,251
15.94%
14.90%
13.80%
Net Income After Taxes
$15,409
$21,630
$39,312
30.94%
28.92%
26.78%
Earnings Per Share
$154.09
$216.30
$393.11
0.31%
0.29%
0.27%

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ABC Healthcare Equipment Company
Unaudited Financial Statements
(000’s Omitted)
Balance Sheet
Year Ended
July 31, 2007 July 31, 2008 July 31, 2009
Cash
$20,030
$1,086
$954
Trade Receivables
$25,000
$57,803
$98,108
Inventories
$18,750
$27,500
$26,675
Other
$43
$62
$84
Total Current Assets
$63,823
$86,451
$125,821
Fixed Assets
$5,000
$5,000
$5,000
Accumulated Depreciation
$2,300
$2,480
$2,640
Net Fixed Assets
$2,700
$2,520
$2,360
Total Assets
$66,523
$88,971
$128,181
Accounts Payable
$1,563
$2,292
$2,223
Accrued Expenses
$1,017
$1,106
$1,074
Total Current Liabilities
$2,580
$3,398
$3,297
Long Term Debt
$30,053
$30,053
$30,053
Total Liabilities
$32,633
$33,451
$33,350
Common Stock
$100
$100
$100
Paid In Capital
$20,000
$20,000
$20,000
Retained Earnings
$13,790
$35,420
$74,731
Total Liabilities & Equity
$66,523
$88,971
$128,181

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