Question

P14-35A Comprehensive analysis (Learning Objectives 2,3, &4) Block Department Stores' chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers. Block Department Stores, Inc Income Statement Compared with Industry Average For the Year Ended December 31 amounts in thousands Block Industry Average 6 Sales revenues 7 Less: Cost of goods s 8 Gross profit 9 Less: Operating expenses 10 11 Less: Interest expense 12 Income before income taxes 13 Less: Income tax expense 14 Net income 15 782 526,286 255,714 64,220 65.7% 9.5% 0.5% 0.3% rating income 1,173 5,083 Block Department Stores, Inc. Balance Sheet Compared with Industry Average As of December 31 (amounts in thousands) Block Industry Average Assets

Answer 1

INCOME STATEMENT
			A	B=(A/782000)*100
			Block		Industry
			Amount	Common size	Average
		Sales Revenue	$782,000	100.00%	100.00%
		Cost of goods sold	$526,286	67.30%	65.70%
		Gross Profit	$255,714	32.70%	34.30%
		Operating expenses	$164,220	21.00%	19.50%
		Operating Income	$91,494	11.70%	14.80%
		Interest expense	$1,173	0.15%	0.50%
		Income before income tax	$90,321	11.55%	14.30%
		Income tax expense	$5,083	0.65%	0.30%
		Net income	$85,238	10.90%	14.00%
		BALANCE SHEET
			A	B=(A/460000)*100
			Block		Industry
			Amount	Common size	Average
		Assets:
		Current Asset	$312,340	67.90%	70.90%
		Fixed assets ,net	$117,760	25.60%	23.70%
		Intangible asset,net	$5,980	1.30%	0.70%
		Other assets	$23,920	5.20%	4.70%
		Total assets	$460,000	100.00%	100.00%
		Liabilities:
		Current Liabilities	$213,440	46.40%	48.30%
		Long Term Liabilities	$104,880	22.80%	16.70%
		Total Liabilities	$318,320	69.20%	65.00%
		Stockholders Equity
		Common Stockholders equity	$141,680	30.80%	35.00%
		Total Liabilities and Equity	$460,000	100.00%	100.00%
	(a)	Ratio of gross Profit to Sales	0.327	Gross Profit /Sales	(255715/782000)
		Ratio of gross Profit to Sales(percentage)	32.70%
		Industry Average	34.30%
	(b)	Ratio of Operating Income to Sales	0.1170	(91494/782000)
		Ratio of Operating Income to Sales(Percentage)	11.70%
		Industry Average	14.80%
	.(c)	Ratio of net income to sales	0.1090	(85238/782000)
		Ratio of net income to sales	10.90%
		Industry Average	14.00%
		Block Department Stores Profit performance is worse than the industry average