Consolidated financial statements for Initech Corporation follow.

Initech Corporation
Consolidated Balance Sheets
(In millions except per share amounts)

LIABILITIES AND STOCKHOLDERS€™ EQUITY

Required:
1. Prepare common size income statements to be used for both vertical and horizontal analysis for 2010€“2011 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.
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 2010 and 2011.
3. Prepare common size balance sheets for vertical analysis for 2010 and 2011 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.
4. Did the proportion of assets invested in the various classes of assets change significantly from 2010 to 2011?
5. How has Initech financed its growth in assets?
6. Did the income statement change as much between 2010 and 2011 as the balance sheet?

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Initech Corporation Consolidated Income Statements In millions except per share amounts) Three Years Ended December 31 2011 2010 Net revenues Cost of goods sold Research and development Marketing, general and administrative expenses Operating costs and expenses Operating income Interest expense Interest income and other, net Income before faxes Provision for taxes Net income $8,782 $3,252 970 1,168 $5,390 $3,392 (50 188 $3,530 1,235 $2,295 $5,844 $2,557 780 1,017 $4,354 $1,490 (54 133 $4,779 $2,316 618 765 $3,699 $1,080 (82) 197 8 $1,569 502 $1,195 376 819 $1,067 December 31, ASSETS 2011 2010 Current assets: Cash and cash equivalents Short-term investments Accounts and notes receiyable, netofallowance $ 1,659 1,477 1,843 993 1,448 838 310 70 for doubtfulaccounts of $22($26 in 2010) Inventories Deferred tax assets Other current assets 1,069 535 205 46 5,802 4,691 Total current assets Property, plant, and equipment: $1,848 4,148 317 6,313 2,317) 3,996 1,416 130 1,463 2,874 311 $ 4,648 1,832) 2,816 496 86 8,089 Land and buildings Machinery and equipmert Construction in progress Less accumulated depreciation Property, plant, and equipment, net Long-term investments Other assets Total assets $11,344 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 $ 399 98 427 200 544 374 391 $2,433 426 297 688 3,844 S 202 110 281 149 435 306 359 $ 1,842 249 180 373 $2,644 Total current liabilities long-term debt Deferred tox liabilities Other longterm liabilities Total liabilities Stockholders' equity: Preferred stock, $0.001 par value, 50 shares authorized; none issued Common stock, $0.001 par value, 1,400 0 0 shares authorized; and issued and outstanding in 2011 and 2010 Capital in excess of par value Retained earnings 2,193 5,306 7,500 $11,344 1,775 3,669 5,445 8.089 Total stockholders' equity Total liabilities and stockholders' equity