Question

Top managers of Sharp 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:


Requirements
1. Prepare a common-size income statement and balance sheet for Sharp Products. The first column of each statement should present Sharp Products’ common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compare Sharp Products’
(a) Ratio of gross profit to net sales,
(b) Ratio of operating income to net sales,
(c) Ratio of net income to net sales with the industry averages. Is Sharp Products’ profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compare Sharp Products’
(a) Ratios of current assets and current liabilities to total assets
(b) Ratio of stockholders’ equity to total assets with the industry averages. Is Sharp Products’ financial position better or worse than the average for theindustry?


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  • CreatedJuly 25, 2014
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