Block Department Stores' chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers.

Requirements
1. Prepare a common-size income statement and balance sheet for Block Department Stores. The first column of each statement should present Block Department Stores' common-size statement, while the second column should present the industry averages.
2. For the profitability analysis, compute Block Department Stores' (a) ratio of gross profit to sales, (b) ratio of operating income to sales, and (c) ratio of net income to sales. Compare these figures with the industry averages. Is Block Department Stores' profit performance better or worse than the industry average?
3. For the analysis of financial position, compute Block Department Stores' (a) ratio of current assets to total assets and (b) ratio of stockholders' equity to total assets. Compare these ratios with the industry averages. Is Block Department Stores' financial position better or worse than the industry averages?

Transcribed Image Text:

Block Department Stores, Inc. Income Statement Compared with Industry Average For the Year Ended December 31 (amounts In thousands) Block 782,000 526,286 255,714 164,220 91,494 1,173 90,321 5,083 85,238 Industry Average 6 Sales revenues Less: Cost of goods sold 8. 100.0% 65.7% 34.3% 19.5% 14.8% 0.5% 14.3% 0.3% 14.0% Gross profit 9 Less: Operating expenses 10 Operating Income 11 Less: Interest expense 12 Income before Income taxes 13 Less: Income tax expense 14 Net Income 15 IS Block Department Stores, Inc. Balance Sheet Compared with Industry Average As of December 31 (amounts In thousands) Block Industry Average Assets 6. 7 Current assets 8 Fixed assets, net 9 Intangible assets, net 10 Other assets 11 Total assets 12 70.9% 23.7% 0.7% 4.7% 100.0% IS 312,340 117,760 5,980 23,920 460,000 Llablitles 13 14 Current llabllitles 15 Long-term llabilitles 16 Total liabilitles 17 18 19 Total common stockholders' equlty 213,440 104,880 318,320 48.3% 16.7% 65.0% IS IS Stockholders' equlty IS 141,680 35.0% 20 21 Total llabilitles and equlty 22 IS 460,000 100.0%