Common Size Income Statement

by Theresa Coley
(Matteson Il.)

1. Prepare a common sizes income statement and balance sheet for McDonough product. The first column of each statement should present McDonough product common size statement and the second column should show the industry average.

2. For the profitability analysis, compute McDonough product (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry average. Is McDonough products profit performance better or worse than the average for the industry?

3. For the analysis of financial position, compute McDonough products (a) current ratio and (b) debt ratio. Compare these ratios with the industry average. Is McDonough's financial position better or worse than the average for the industry?

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