Question
In: Finance
In a financial statement analysis, you are examining the common-size income statements for the XYZ Metrical...
In a financial statement analysis, you are examining the common-size income statements for the XYZ Metrical Company for the past 5 years and have noticed that the cost of goods as a percentage of sales has been increasing steadily. At the same time, EBIT as a percentage of sales has been decreasing. What might account for the trends in these ratios? What actions might managers take to improve these ratios?
Solutions
Expert Solution
The rise in the ratio of cost of goods to sales and decrease of EBIT to sales ratio shows:
1. The company has been providing discounts of sales.
2. The company has been acquiring costlier goods and could not able to transfer the increase of cost to sales.
3. Other expenses like operating and administrative, has been rising.
4. The company has been operating in recession period and tough competition.
The required action to be taken by the managers in such situations are:
a. Increase the sales without providing any discounts or reducing sales price.
b. Strive for the new customers and selling points, so that the sales would be overhauled in recession.
c. Acquire the goods at the cheapest rate and raises new sources of purchases.
d. Reduces the overheads of the company so that operational and administrative expenses be reduced.
e. bring an attitude of raising the sales and profits among the employees of the company.
f. Regular follow up of the company performance should be there, so that action would be taken at the right time and before incurring of any loss.
================================
jeff jeffy answered 1 year agoRelated Solutions
Common-size financial statements. Prepare common-size income statements for Walmart and Starbucks using the January 2015 and...
Common-size financial statements. Prepare common-size
income statements for Walmart and Starbucks using the January 2015
and September 2014 information in the popup window:
LOADING...
. Which company is doing a better job of getting sales dollars
to net income? Where is the one company having an advantage over
the other company in turning revenue into net income?
Complete the table below: (Round to two decimal places. Net
income to three decimal places.)
Abbreviated Income Statements ($ in
Millions)
Company
Walmart,...
Common-size financial statements. Prepare common-size income statements for Walmart and Starbucks using the January 2015 and...
Common-size financial statements. Prepare common-size income
statements for Walmart and Starbucks using the January 2015 and
September 2014 information in the popup window: Which company is
doing a better job of getting sales dollars to net income? Where
is the one company having an advantage over the other company in
turning revenue into net income?
Complete the table below: (Round to two decimal places. Net
income to three decimal places.)
Abbreviated Income Statements ($ in
Millions)
Company
Walmart, Inc.
Starbucks...
Common-size financial statements. Prepare common-size income statements for Walmart and Starbucks using the January 2015 and...
Common-size financial statements. Prepare common-size income
statements for Walmart and Starbucks using the January 2015 and
September 2014 information in the popup window:
LOADING...
. Which company is doing a better job of getting sales dollars
to net income? Where is the one company having an advantage over
the other company in turning revenue into net income?
Complete the table below: (Round to two decimal places. Net
income to three decimal places.)
Abbreviated Income Statements ($ in
Millions)
Company
Walmart,...
prepare a common size income statement from the following income statement: CONSOLIDATED STATEMENTS OF OPERATIONS -...
prepare a common size income statement from the following income
statement:
CONSOLIDATED STATEMENTS OF OPERATIONS - USD
($)
12 Months Ended
shares in Millions, $ in Millions
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Total net
sales
$10,716
$11,664
$12,554
Credit
income and other
451
355
319
Total
revenues
11,167
12,019
12,873
Costs and
expenses/(income):
Cost of
goods sold (exclusive of depreciation and amortization shown
separately below)
7,013
7,870
8,208
Selling,
general and administrative (SG&A)
3,585
3,596
3,845...
A useful tool in financial statement analysis is the common-size financial statement. What does this tool...
A useful tool in financial statement analysis is the
common-size financial statement. What does this tool enable the
financial analyst to do?
Evaluate financial statements of companies within a given
industry of approximately the same value.
Determine which companies in the same industry are at
approximately the same stage of development.
Compare the mix of assets, liabilities, capital, revenue, and
expenses within a company over time or between companies within a
given industry without respect to relative size.
Ascertain the...
Common-Size Income Statements and Horizontal Analysis Income statements for Mariners Corp. for the past two years...
Common-Size Income Statements and Horizontal Analysis
Income statements for Mariners Corp. for the past two years are
as follows:
(amounts in thousands
of dollars)
2017
2016
Sales revenue
$60,000
$50,000
Cost of goods sold
42,000
30,000
Gross profit
$18,000
$20,000
Selling and administrative expense
9,000
5,000
Operating income
$9,000
$15,000
Interest expense
2,000
2,000
Income before tax
$7,000
$13,000
Income tax expense
2,000
4,000
Net income
$5,000
$9,000
Required:
1. Using the format in Example 13-5, prepare
common-size comparative income...
Common-Size Income Statements and Horizontal Analysis Income statements for Mariners Corp. for the past two years...
Common-Size Income Statements and Horizontal Analysis
Income statements for Mariners Corp. for the past two years are
as follows:
(amounts in thousands
of dollars)
2017
2016
Sales revenue
$60,000
$50,000
Cost of goods sold
42,000
30,000
Gross profit
$18,000
$20,000
Selling and administrative expense
9,000
5,000
Operating income
$9,000
$15,000
Interest expense
2,000
2,000
Income before tax
$7,000
$13,000
Income tax expense
2,000
4,000
Net income
$5,000
$9,000
Required:
1. Using the format in Example 13-5, prepare
common-size comparative income...
Common-Size Income Statements and Horizontal Analysis Income statements for Mariners Corp. for the past two years...
Common-Size Income Statements and Horizontal Analysis
Income statements for Mariners Corp. for the past two years are
as follows:
(amounts in thousands
of dollars)
2017
2016
Sales revenue
$60,000
$50,000
Cost of goods sold
42,000
30,000
Gross profit
$18,000
$20,000
Selling and administrative expense
9,000
5,000
Operating income
$9,000
$15,000
Interest expense
2,000
2,000
Income before tax
$7,000
$13,000
Income tax expense
2,000
4,000
Net income
$5,000
$9,000
Required:
1. Using the format in Example 13-5, prepare
common-size comparative income...
Problem 3-18 Common-Size and Common-Base-Year Financial Statements In addition to common-size financial statements, common-base-year financial statements...
Problem 3-18 Common-Size and Common-Base-Year Financial
Statements
In addition to common-size financial statements,
common-base-year financial statements are often used. Common-base
year financial statements are constructed by dividing the
current-year account value by base-year account value. Thus, the
result shows the growth rate in the account.
Prepare the common-size balance sheet and common-base-year balance
sheet for the company. Use 2016 as the base-year. (Do not
round intermediate calculations. Enter all common-size answers as a
percent. Round your common-size answers to...
(Analyzing common-size financial statements) Use the common-size financial statements found here: Common-Size Balance Sheet 2016 Cash...
(Analyzing common-size financial statements) Use the
common-size financial statements found here:
Common-Size Balance Sheet
2016
Cash and marketable securities
$
500
1.5
%
Accounts receivable
6,000
18.2
Inventory
9,450
28.7
Total current assets
$
15,950
48.4
%
Net property, plant, and equipment
16,980
51.6
Total assets
$
32,930
100.0
%
Accounts payable
$
7,240
22.0
%
Short-term notes
6,750
20.5
Total current liabilities
$
13,990
42.5
%
Long-term liabilities
6,990
21.2
Total liabilities
$
20,980
63.7
%
Total common shareholders’...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Consider the following linear programming problem: Maximize 10X + 8Y Subject to: 40X + 24Y <=...
- Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies...
- Think about a company you have worked for, either currently or in the past. Reflect upon...
- 1) X Bank has $1 million in new funds that must be allocated to mortgage (home)...
- Needs to be done in PYTHON A. Create a Dollar currency class with two integer attributes...
- Cash Budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget...
- Consider the case of Falcon Freight Inc. (FF): Five years of realized returns for FF are...
ADVERTISEMENT