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In: Finance

Restate the following income statements for doing a Common Size comparison: Mega Corporation                            

Restate the following income statements for doing a Common Size comparison:

Mega Corporation                                        My Small Company

Sales                    7,000,000                                                  80,000

Costs                    5,000,000                                                  50,000

Gross Margin         2,000,000                                                  30,000

Depreciation          200,000                                                   15,000

EBIT                     1,800,000                                                  15,000

Taxes                   630,000                                                   5,000

Net Income           1,170,000                                                  10,000

Solutions

Expert Solution

In order to do a Common Size statement comparison, we need to convert all the figures given as percentage of sales as done below

Formulas used in the excel sheet are

Now using the above details we can compare both the companies with respect to the corresponding percentage of every element. Like Costs of Mega Corporation are higher as compared to My small company on the basis of percentage sales, For Mega corporation Costs are 71.43% of Sales and that of My Small Company are 62.50% of Sales. In this way we can analyse all the various points.

Hope I am able to solve your concern. If you are satisfied hit a thumbs up !!

jeff jeffy answered 1 year ago
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