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McDonough Products, Inc_common-size income statement and balance sheet

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Question;Top managers of;McDonough Products, Inc., have asked for your help in comparing the company s;profit performance and financial position with the average for the industry.;The accountant has given you the company s income statement and balance sheet;and also the following data for the industry. The problem is that McDonough is;in dollars and the Industry Average is in percentages. To complete the analysis;you will need to convert McDonough dollar amounts to percentages.;McDonough;Products, Inc.;Income Statement Compared with Industry Average;Year;Ended December 31, 2010;McDonough;Industry Average;Net sales................................. $700,000 100.0%;Cost of goods sold................ 490,000;57.3;Gross profit....................... 210,000;42.7;Operating expenses..................... 175,000 29.4;Operating income.................... 35,000 13.3;Other expenses.............................. 7,000 2.5;Net income.............................. $28,000 10.8%;McDonough;Products, Inc.;Balance;Sheet Compared with Industry Average;December;31, 2010;McDonough "Industry Average;Current assets........... $471,200 72.1%;Fixed assets, net........... 114,700 19.0;Intangible assets, net................. 21,080 4.8;Other assets................................. 13,020 4.1;Total........................................ 620,000 100.0%;Current liabilities.......... 240,560 47.2%;Long-term liabilities............ 135,160 21.0;Stockholders equity................. 244,280 31.8;Total........................... $620,000 100.0%;Industry Average Current Ratio 1.53;Industry Average Total Debt to Total Assets 0.68;Requirements;1. Prepare a common-size income statement and balance sheet for McDonough;Products. The first column of each statement should present McDonough Products;common-size statement, and the second column should show the industry averages.;2. For the;profitability analysis, compute McDonough Products (a) ratio of gross profit to;net sales (b) ratio of operating income to net sales, and (c) ratio of net;income to net sales. Compare these figures with the industry averages. Is;McDonough Products profit performance better or worse than the average for the;industry?;3. For the analysis of;financial position, compute McDonough Products (a) Current ratio and (b) Debt;ratio. Compare these ratios with the industry averages. Is McDonough Products;financial position better or worse than the average for the industry?

 

Paper#37394 | Written in 18-Jul-2015

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