As the newest hire to the financial analysis group at Patterson Printing Company, you have been asked to perform a basis financial analysis of the company's most recent financial statements. The 2016 balance sheet and income statement for the Patterson are as follows:

Patterson Printing Company

Balance Sheet, December, 31, 2016

Cash and marketable securities ………………………………..        $ 500

Accounts receivable ……………………………………………       6,000

Inventory ………………………………………………………       9,500

Total current assets ……………………………………………. $16,000

Net property, plant, and equipment …………………………… 17,000

Total assets ……………………………………………………. $33,000

Accounts payable ……………………………………………… $ 7,200

Short-term debt ………………………………………………..        6,800

Total current liabilities ……………………………………….. $14,000

Long-term liabilities …………………………………………..         7,000

Total liabilities ………………………………………………… $21,000

Total common stockholders’ equity …………………………... 12,000

Total liabilities and stockholders’ equity …………………….... $33,000

Patterson Printing Company

Income Statement for the Year Ended December 31, 2016

Revenues ……………………………………………………. $30,000

Cost of goods sold …………………………………………..           (20,000)

Gross profit ………………………………………………….           $10,000

Operating expenses ………………………………………….            (8,000)

Net operating income ………………………………………..           $ 2,000

Interest expense ……………………………………………..            (900)

Earnings before taxes ………………………………………..           $ 1,100

Income taxes …………………………………………………           (400)

Net income …………………………………………………..           $  700

a. After discussing your training assignment with a fellow analyst who was hired last year, you learn that the first step in your completing the assignment is to prepare a common-size balance sheet for Patterson.

b. The second step is to prepare a common-size income statement for the firm.