Question

Complete the​ common-size balance sheet for these companies. Review each​ company's percentages of total assets. Are these companies operating with similar philosophies or in similar​ industries? What appears to be the major difference in financing for these two​ companies?

		% of			% of				% of			% of
	Balance	Total		Balance	Total			Balance	Total		Balance	Total
ASSETS	Co. 1	Assets		Co. 2	Assets		LIABILITIES	Co. 1	Assets		Co. 2	Assets
Current assets							Current liabilities
Cash	$5,304		%	$291		%	Accounts payable	$12,230		%	$668		%
Investments	$4,047		%	$342		%	Short-term debt	$1,173		%	$0		%
Accounts receivable	$8,173		%	$227		%	Other short-term
Inventory	$5,222		%	$490		%	liabilities	$0		%	$111		%
Total current assets	$22,746		%	$1,350		%	Total current liabilities	$13,403		%	$779		%
Long-term investments	$78		%	$293		%	Long-term debt	$2,960		%	$7		%
Net plant, property							Other liabilities	$4,970		%	$52		%
and equipment	$9,801		%	$1,359		%	Total liabilities	$21,333		%	$838		%
Goodwill	$5,276		%	$61		%	OWNERS’ EQUITY
Intangible	$6,051		%	$14		%	Common stock	$3,175		%	$923		%
Other	$3,635		%	$89		%	Treasury stock	$-6,643		%	$0		%
							Retained earnings	$29,722		%	$1,405		%
							Total owners’ equity	$26,254		%	$2,328		%
							TOTAL LIABILITIES
TOTAL ASSETS	$47,587	100.00	%	$3,166	100.00	%	AND OWNERS’ EQUITY	$47,587	100.00	%	$3,166	100.00	%

​

Complete the table​ below:  ​(Round up to two decimal​ places.)

		% of				% of
	Balance	Total			Balance	Total
ASSETS	Co. 1	Assets		LIABILITIES	Co. 1	Assets
Current assets				Current liabilities
Cash	$5,304		%	Accounts payable	$12,230		%
Investments	$4,047		%	Short-term debt	$1,173		%
Accounts receivable	$8,173		%	Other short-term
Inventory	$5,222		%	liabilities	$0		%
Total current assets	$22,746		%	Total current liabilities	$13,403		%
Long-term investments	$78		%	Long-term debt	$2,960		%
Net plant, property				Other liabilities	$4,970		%
and equipment	$9,801		%	Total liabilities	$21,333		%
Goodwill	$5,276		%	OWNERS’ EQUITY
Intangible	$6,051		%	Common stock	$3,175		%
Other	$3,635		%	Treasury stock	$-6,643		%
				Retained earnings	$29,722		%
				Total owners’ equity	$26,254		%
				TOTAL LIABILITIES
TOTAL ASSETS	$47,587	100.00	%	AND OWNERS’ EQUITY	$47,587	100.00	%

Answer 1

aThe two companies are operating with different philosophies and are in different industries.

This can be seen from the below ratio table which highlights that Company 2 is more capital intensive (Higher portion of assets in capital) while at the same time also has a higher money tied up in working capital. Also company 1's business has a much higher percentage of Intangible assets which indicate in the business of Company 1, intangible assets are more important than in 2's. The table for this analysis is :

Asset	Balance Co 1	% of total Assets	Balance Company 2	% of total Assets	Liability	Balance Co 1	% of total Liabilities	Balance Company 2	% of total Liabilities
Cash	5304	11.15%	291	9.19%	Accounts Payable	12230	25.7%	668	21.1%
Investments	4047	8.50%	342	10.80%	Short Term Debt	1173	2.5%	0	0.0%
Accounts Receivable	8173	17.17%	227	7.17%	Other Short Term Liabilities	0	0.0%	111	3.5%
Inventory	5222	10.97%	490	15.48%	Total Current Liabilities	13403	28.2%	779	25%
Total Current Assets	22746	47.80%	1350	42.64%	Long Term Debt	2960	6.2%	7	0.2%
Long Term Investments	78	0.16%	293	9.25%	Other Liabilities	4970	10.4%	52	1.6%
Plant Property and Equipment	9801	20.60%	1359	42.92%	Total Liabilities	21333	44.8%	838	26%
Goodwill	5276	11.09%	61	1.93%	Owners Equity
Intangible	6051	12.72%	14	0.44%	Common Stock	3175	6.7%	923	29.2%
Other	3635	7.64%	89	2.81%	Treasury Stock	-6643	-14.0%	0	0.0%
					Retained Earnings	29722	62.5%	1405	44.4%
					Total Owners Equity	26254	55.2%	2328	74%
Total	47587		3166		Total	47587		3166

Also as seen from the above table, we will find that Company 1 is more levered and has a higher debt financing than Company 2. This is also the major difference between the source of financing between the two companies.

The required table from the question is :

Asset	Balance Co 1	% of total Assets	Liability	Balance Co 1	% of total Liabilities
Cash	5304	11.15%	Accounts Payable	12230	25.7%
Investments	4047	8.50%	Short Term Debt	1173	2.5%
Accounts Receivable	8173	17.17%	Other Short Term Liabilities	0	0.0%
Inventory	5222	10.97%	Total Current Liabilities	13403	28.2%
Total Current Assets	22746	47.80%	Long Term Debt	2960	6.2%
Long Term Investments	78	0.16%	Other Liabilities	4970	10.4%
Plant Property and Equipment	9801	20.60%	Total Liabilities	21333	44.8%
Goodwill	5276	11.09%	Owners Equity
Intangible	6051	12.72%	Common Stock	3175	6.7%
Other	3635	7.64%	Treasury Stock	-6643	-14.0%
			Retained Earnings	29722	62.5%
			Total Owners Equity	26254	55.2%
Total	47587	100.00%	Total	47587	100.0%