Question

1. Prepare comparative common-sized statements, rounding percent to one decimal place. Interpret the analyses.

                                                                                    Dell Inc.                      Apple Inc.

Sales (net)                                                                    61,101                         36,537

Cost of sales                                                                50,144                         23,397

Gross profit                                                                 10,957                          13,140

Selling, general, and admin expenses 7,104                             4,149

Research and development                                             663                          1,333

Operating expenses                                                       7,767                           5,482

Income from operations                                               3,190                         7,658

2. What are the objectives of comparative common -sized statements?

Answer 1

Common-size Income statements
	Dell Inc.	% of sales	Apple Inc.	% of sales	Analysis & intrepretation as a % of sales
Sales(net)	61101	100.0%	36537	100.0%
Cost of sales	50144	82.1%	23397	64.0%	Apple's Cost of sales as a % to sales is less compared to that of Dell
Gross profit	10957	17.9%	13140	36.0%	Dell's G/P % is less due to high proportion of Cost of Sales
S,G & A expense	7104	11.6%	4149	11.4%	S, G & A are neraly the same % to sales for both the companies.
R& D	663	1.1%	1333	3.6%	R&D expenses are more in Apple
Opg. Exp.	7767	12.7%	5482	15.0%	Opg. expenses are more in Apple
Income from operations	3190	5.2%	7658	21.0%	Income from operations as a % of sales is less for Dell mainly due to the high proportion of cost of sales.

b..Items of expenses expressed as a % of sales, or balance sheet items as a % of total assets ----

between companies or covering different periods,

make the comparison , very easy , & distortions /variations can be identified , just at a glance ,

to form a quick & meaningful opinion about the various components of the financial statements.

The main objective of comparative common-sized statements are

1.to have knowledge about the performance of the companies involved, with a view to improve

2.analyse & find out variations, if any, so as to control costs /expenses & improve efficiency of operations.

3. To study the trend, if compared with prior years ,so that expenses/incomes under different heads or items like accounts receivables/payables--can be justified or reasons established for any wide variations with the past trend .