Question

Homework - Terra Stone - Google Chrome math.com/StudentPlayhomeworkshomeword=551107122&question de fushede de7827 centerwinyes pring 1 Term 2020 - College wide and BLC Terra Stone & 01/15/20 1:27 lomework: Chapter 3 Homework core: 0 of 1 pt 20f 4 (0 complete) HW Score: 0%, 0 of 3-19 (similar to) IE Question Help Common size statement analysis A common size income statement for Creek Enterprises 2018 operations follows Using the firm's 2019 income statement develop the 2019 common se income statement and compare to the 2018statement which areas require further analysis and investigation? Complete the common se income statement for the year ending December 31, 2019 and compare to the common se income statement for the year ending December 2018 Round to one decimal place) Creek Enterprises Common Se Income Statement for the Years Ended December 31, 2018 and December 2013 2019 2018 1000 Sales revenue Las Cost of goods sold Og General and we expenses Depreciation expense Tawas 21) Earrings w o rcommon och Enter any numbers the ed elds and then check Check

Answer 1

Answer:

2018 69.8% 100.0% 65.9% 34.1% Creek Enterprises Common Size Income Statement For the years Ended December 31, 2018 and December 2019 2019 Sales Revenue 100.0% Less: Cost of goods sold Gross Profits 30.2% Less: Operating expenses Selling expenses 9.9% General and administrative expenses 6.0% Lease expense 0.6% Depreciation expense 3.5% Total operating expense 19.9% Operating profit 10.3% Less: Interest expenses Net profits before taxes 6.8% Less: Taxes (rate = 21%) Net profit after taxes 5.4% Less: Preferred stock dividends 0.3% Earnings available for common stockholders 5.1% 12.2% 6.3% 0.4% 3.8% 22.7% 3.4% 1.4% 11.4% 2.1% 9.3% 2.0% 7.3% 0.2% 7.1%

The above excel (including source table) with 'show formula' is as below:

30048000 20974000 =D2-D3 5 Creek Enterprises Income Statement for the Year Ended Sales Revenue Less: Cost of goods sold Gross Profits Less: Operating expenses Selling expenses General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profit Less: Interest expenses Net profits before taxes Less: Taxes (rate = 217) Net profit after taxes Less: Preferred stock dividends Earnings available for common stockholders 2961000 1790000 190000 1049000 = SUM(C6:09) =D4-010 1028000 =D11-012 =D13-217 =D13-014 82000 =D15-D16 2018 0.659 =F23-F24 Creek Enterprises Common Size Income Statement For the ears Ended December 31, 2018 and December 2019 2019 Sales Revenue =D2/$D$2 Less: Cost of goods sold =D3/$D$2 Gross Profits =D4/$D$2 Less: Operating expenses Selling expenses =C6/$D$2 0.122 General and administrative expenses =C7/$D$2 0.063 Lease expense =C8/$D$2 0.004 Depreciation expense =C9/$D$2 0.038 Total operating expense =D101$D$2 Operating profit =D1102 Less: Interest expenses =D12/$D$2 Net profits before taxes =013/$D$2 Less: Taxes (rate = 217) =D14/$D$2 Net profit after taxes =015/$D$2 Less: Preferred stock dividends =D167$D$2 Earnings available for common stockholders I=117/$D$2 = SUMIE27-E30 =F25-F31 0.021 =F32-F33 0.02 =F34-F35 0.002 =F36-F37

Comments:

Net profit after axes as % to sales has gone down from 7.3% to 5.4% in spite of improvement in managing operating expenses which decreased from 22.7% to 19.9%. The company has done well in managing selling expenses. Increase in cost of goods sold and increase in interest expense have led to decrease in net profit margins.

Cost of Goods sold has increased from 65.9% to 69.8%. It shows a jump of 3.9% and is an area of concern and requires further analysis and investigation.