Question
In: Finance
How do you standardize income statements? In other words, how do you compute a common-size account...
How do you standardize income statements? In other words, how do you compute a common-size account item in the Income Statement? Give an example.
Solutions
Expert Solution
Standardization of the income statement will be helping in making the income statement more efficient and comparable as to other companies and it will be also helping in order to determine whether the company is more efficient than other companies in the same group or not so the income statement common sizing is an important way in order to compare the income statement of a company to other companies by different analysts.
Common sizing of income statement will be done by dividing each line item by topline or sales and then they will be expressing them in the form of percentage. There are various important ratios which are derived by the analyst as a percentage of sales and they could be gross margin on net margin or operating margin and they could be helpful in order to compare the performance of an entity in respect to other entity in the same industry and derived at whether the company is outperforming its peers or underperforming it's peers.
For example, we will be trying to express the percentage of gross profit in respect to sales and we will be deriving the gross profit margin and we will be trying to compare that gross profit margin across the industry segment in order to derive whether the company is attracting a better profit in respect to the industry or not.
jeff jeffy answered 1 year agoRelated Solutions
How do you standardize the balance sheet? In other words, how do you compute a common-size...
How do you standardize the balance sheet? In other
words, how do you compute a common-size account in the Balance
Sheet. Give an example
How do you standardize the balance sheet? In other words, how do you compute a common-size...
How do you standardize the balance sheet? In other words, how do
you compute a common-size account in the Balance Sheet. Give an
example.
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,...
Common-Size and Pro Forma Income Statements Refer to the income statements for The Gap, Inc., presented...
Common-Size and Pro Forma Income
Statements
Refer to the income statements for The Gap, Inc., presented
below.
a. Prepare common-size income statements for fiscal years 2014
(ending January 31, 2015) and 2013 (ending February 1, 2014).
Round answers to one decimal place (i.e., 0.2568 = 25.7%).
The Gap, Inc.
Common-Size Income Statements
Fiscal year ended
Jan. 31, 2015
Feb. 1, 2014
Net sales
$15,779
Answer%
$15,492
Answer%
Cost of goods sold & occupancy expenses
9,925
Answer%
9,634
Answer%
Gross profit...
Common size statements: the following are income statements for Lowe's and Home depot for the years...
Common size statements: the following are income statements for
Lowe's and Home depot for the years ended February 3, 2012 and
January 29, 2012, respectively:
1. The companies do not use exactly the same account titles.
Align the accounts accross two companies int he manner you beleive
to be the most appropriate. Then prepare common-size income
statemens for Lowe's and The Home Depot.
2. Compare the two companies by using the common-size
statements.
The income statements for the two companies...
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?
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...
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