Question

7.pts Compute "Common Size Statement" for Financial Statement data, enter answers in right column Income Statement Revenue Cost of goods GROSS PROFIT COMPUTE COMMON SIZE STATEMENT BELOW 280 195 85 Sell + Admin Exps Depreciation Exps EBIT Interest Expense Income before Tax Income Tax NET INCOME 30 5 50 4 46 16 30 BALANCE SHEET Cash Accts Receivable Inventory Tot Current Assets Plant & Equipment Total Assets Current Liabilities Long Term Debt Total Liabilities Shareholder Equity TOT. LIABS + EQUITY 60 80 250 390 400 790 200 300 500 290 790

Answer 1

Answer

Common size financial statements

INCOME STATEMENT	$	%
Revenue	280	100%
Cost of goods sold	195	69.65%
Gross margin	85	30.35%
Selling and administrative expenses	30	10.71%
Depreciation expense	5	1.78%
Earnings before interest and tax (EBIT)	50	17.85%
Interest expense	4	1.42%
Income before tax	46	16.42%
Income tax	16	5.71%
Net income	30	10.71%
BALANCE SHEET
Cash	60	7.59%
Account receivables	80	10.12%
Inventory	250	31.64%
Total current assets	390	49.36%
Plant & equipment	400	50.64%
Total Assets	790	100%
Current liabilities	200	25.31%
Long term Debt	390	37.97%
Total liabilities	500	63.30%
Shareholder's equity	290	36.70%
Total liabilities and shareholder's equity	790	100%

Calculations

In common size income statement all items are measured on the basis of revenue.

The below are the percentage of all items in income statement.

Revenue = (280 / 280) × 100 = 100%

Cost of goods sold = (195 / 280) × 100 = 69.65%

Gross profit = (85 / 280) × 100 = 30.35%

Selling and administrative expenses

= (30 / 280) × 100 = 10.71%

Depreciation expense = (5 / 280) × 100 = 1.78%

Earnings before interest and tax

= (50 / 280) × 100 = 17.85%

Interest expense = (4 / 280) × 100 = 1.42%

Income before tax = (46 / 280) × 100 = 16.42%

Income tax expense = (16 / 280) × 100 = 5.71%

Net profit = (30 / 280) × 100 = 10.71%

In balance sheet the assets side items percentage is valued on the basis total assets and liabilities side is valued on the basis of total liabilities.

The below are the calculations of percentage of balance sheet items.

Cash = (60 / 790) × 100 = 7.59%

Account receivables = (80 / 790) × 100 = 10.12%

Inventory = (250 / 790) × 100 = 31.64%

Total current assets = (390 / 790) × 100 = 49.36%

Plant & equipment = (400 / 790) × 100 = 50.64%

Total assets = (790 / 790) × 100 = 100%

Current liabilities = (200 / 790) × 100 = 25.31%

Long term debt = (300 / 790) × 100 = 37.97%

Total liabilities = (500 / 790) × 100 = 63.30%

Shareholder's equity = (290 / 790) × 100 = 36.70%

Total liabilities and shareholder's equity

= (790 / 790) × 100 = 100%

Revenue is $280 , total assets is $790 and liabilities and shareholder's equity is $790.

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