Question

Examine the balance sheets and income statements for Fairplay Inc.


Additional information:
• All sales are on credit.
• All purchases of inventory are on credit.
• Fairplay must begin repaying its long-term debt in 2020.

Required:
a. Prepare common size (vertical analysis) balance sheets and income statements for 2016, 2017, and 2018.
b. Analyze and interpret the common size financial statements you prepared.
c. How are these common size statements more useful than the statements originally prepared by Fairplay?
d. Why would it be unwise to examine the common size financial statements without considering the financial statements originally prepared by Fairplay?


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  • CreatedFebruary 26, 2015
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