Question

Section D: Financial Statement Analysis--Analytical Method The condensed income statements through income from operations for Amazon, Best Buy, and Walmart for a recent fiscal year follow in millions): Amazon Sales Cost of Goods Sold Gross Profit Selling and General Expenses Operating Expenses Income from Operations $88,988 62,752 $26,236 26,058 Best Buy $40,339 31,292 $ 9,047 7,592 Walmart $485,651 365,086 $120,565 93,418 0 $_178 $_1.450 $ 27.147 1. Prepare comparative common-sized income statements for each company. (Round percentages to one decimal place). 2. Use the common-sized analysis to compare the financial performance of the three companies.

Answer 1

Ans. 1		Amazon	Best Buy	Walmart
		Amount	%	Amount	%	Amount	%
	Sales	$88,988	100.0%	$40,339	100.0%	$485,651	100.0%
	Cost of goods sold	$62,752	70.5%	$31,292	77.6%	$365,086	75.2%
	Gross profit	$26,236	29.5%	$9,047	22.4%	$120,565	24.8%
	Selling and general expenses	$26,058	29.3%	$7,592	18.8%	$93,418	19.2%
	Operating expenses	$0	0.0%	$5	0.0%	$0	0.0%
	Income from operations	$178	0.2%	$1,450	3.6%	$27,147	5.6%
Ans. 2	This common size analysis indicates that the gross profit as percentage of sales is highest in Amazon company.
	Walmart company is doing great in comparision to other companies as its income from operations as
	a percentage on sales is highest.