Question

. Using the firm's 2019 income statement develop the 2019 common-size income statement and compare it to the Common-size statement analysis A common-size income statement for Creek Enterprises 2018 operations follows 2018statement. Which areas require further analysis and investigation? Complete the common-size income statement for the year ending December 31, 2019 and compare it to the common-size Income statement for the year ending December 2018: (Round to one decimal place.) Creek Enterprises Common-Size Income Statement for the Years Ended December 31, 2018 and December 2019 2019 2018 100.0 % 65.5 34.5 % Sales revenue Less: Cost of goods sold Gross profils Less: Operating expenses Selling expense General and administrative expenses 12.9% Lease expense 3.6 Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 21%) Net profits after taxes 23.3 11.2% 1.9 9.3 % 2.0 7.3% Less: Preferred stock dividends Earnings available for common stockholders 7.1 %

Answer 1

Creek Enterprises
Common-Size Income Statement
for the Years Ended December 31, 2018 and December 2019
	2019		2018
Sales revenue		100.0%		100.0%
Less: Cost of goods sold		69.9%		65.5%
Gross profits		30.1%		34.5%
Less: Operating expenses
Selling expense	10.1%		12.90%
General and administrative expenses	5.9		6.1
Lease expense	0.8		0.7
Depreciation expense	3.3		3.6
Total operating expense		20.1		23.3
Operating profits		10.0%		11.2%
Less: Interest expense		3.5		1.9
Net profits before taxes		6.6%		9.3%
Less: Taxes		1.4		2.0
Net profits after taxes		5.2%		7.3%
Less: Preferred stock dividends		0.3		0.2
Earnings available for common stockholders		4.9%		7.1%

Note: There is a slight difference in the net profits before taxes due to rounding off. Subsequent percentages are also affected due to the same. Kindly fill in appropriately.

The cost of goods sold and interest expense shows significant change from 2018 and needs to be analyzed and investigated.