Comparative financial statements for Initech Corporation follow:

Required:
1. Prepare common size income statements to be used for both vertical and horizontal analysis for 2007–2009.
2. Using the common size income statements for both vertical and horizontal analysis prepared in part (1), indicate why Initech’s profits increased more rapidly than sales for 2008 and 2009.
3. Prepare common size balance sheets for vertical analysis for 2008 and 2009.
4. Did the proportion of assets invested in the various classes of assets change significantly from 2008 to 2009?
5. How has Initech financed its growth in assets?
6. Did the income statement change as much between 2008 and 2009 as the balancesheet?

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Initech Corporation Consolidated Statements of Income Three Years Ended December 31 2008 $5,844 (In millions except per share 2009 2007 $4,779 Net revenues Cost of goods sold Research and development Marketing, general and administrative Operating costs and expenses Operating income Interest expense Interest income and other, net Income before taxes Provision for taxes Net income 970 168 $5,390 765 3,699 $4,354 (50) 133 197 $3,530 1,235 2,295 $1,067 Initech Corporation Consolidated Balance Sheets (In millions except per share amounts) 2009 Current assets $1,843 Cash and cash equivalents Short-term investments Accounts and notes receivable, net of S 1,659 allowance for doubtful accounts of $22 1,448 1,069 (S26 in 2008) Inventories Deferred tax assets Other current assets Total current assets 205 5,802 Property, plant, and equipment: Land and buildings Machinery and equipment Construction in progress 1,848 1,463 2,874 4,648 1,832 Less accumulated depreciation Property, plant, and equipment, net Long-term investments Other assets Total assets 496 86 130 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt Long-term debt redeemable within one year Accounts payable Deferred income on shipments to distributors Accrued compensation and benefits Other accrued liabilities Income taxes payable Total current liabilities 110 427 200 149 435 306 359 1,842 S 2,433 Long-term debt Deferred tax liabilities Other long-tem liablities Total liabilities Stockholders' equity: 373 $2,644 Preferred stock, $0.001 par value, 50 shares noneI Common stock, $0.001 par value, 1,400 shares authorized; 1,000 issued and outstanding in 2009 and 2008 Capital in excess of par value Retained earnings Total stockholders' equity 2,193 5,306 7,500 5,445 $8,089 Total liabilities and stockholders' equity