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

Transcribed Image Text:

McConnell Department Stores, Inc. Income Statement Compared with Industry Average For the Year Ended December 31 4 (amounts in thousands McConnell Industry Average 100.0% 65.6% -34.4% 6 Sales revenues 7 Less: Cost of goods sold 8 Gross profit 9 Less: Operating expenses 10 Operating income 11 Less: Interest expense 12 Income before income taxes 13 Less: Income tax expense 14Net income 15 781,000 253,825 162,448 91,377 3,060 88,317 19.6% 14.8% 0.1% 14.7% 0.4% 4750 83,567 McConnell Department Stores, Inc. Balance Sheet Compared with Industry Average As of December 31 amounts in thousands) McConnel Industry Average 6 7 Current assets 8 Fxed assets, net 9 Intangible assets, net 10 Other assets 11 Total assets 12 13 14 Current liabilities Assets 285,180 107 ,520 5,040 709% 2398 0.9 4.4% 100.0% 260 420,000 Liabilitles 48.0% 16.4% 64.4% 192,360 15 Long-term liabilities 16 Total liabilities 17 18 19 Total common stockholders equity 20 94,920 287,280 1 132,720 Stockholders' equity 35.6% 21 Total labilities and equity 100.0%