Common-size statement analysis A common-size income statement for Creek Enterprises 2018 operations follows. Using the firms 2019 income statement presented in Problem 316, develop the 2019 common-size income statement and compare it with the 2018 statement. Which areas require further analysis and investigation? Creek Enterprises Common-Size Income Statement for the Year Ended December 31, 2018 Sales revenue ($35,000,000) 100.0% Less: Cost of goods sold 65.9 Gross profits 34.1% Less: Operating expenses Selling expense 12.7% General and administrative expenses 6.3 Lease expense 0.6 Depreciation expense 3.6 Total operating expense 23.2% Operating profits 10.9% Less: Interest expense 1.5 Net profits before taxes 9.4% Less: Taxes (rate = 21%) 2.0 Net profits after taxes 7.4% Less: Preferred stock dividends 0.1 Earnings available for common stockholders 7.3%

3-16 income statement

Creek Enterprises Income Statement for the Year Ended December 31, 2019 Sales revenue $30,000,000 Less: Cost of goods sold 21,000,000 Gross profits $9,000,000 Less: Operating expenses Selling expense $3,000,000 General and administrative expenses 1,800,000 Lease expense 200,000 Depreciation expense 1,000,000 Total operating expense $6,000,000 Operating profits $3,000,000 Less: Interest expense 1,000,000 Net profits before taxes $2,000,000 Less: Taxes (rate = 21%) 420,000 Net profits after taxes $1,580,000 Less: Preferred stock dividends 100,000 Earnings available for common stockholders $1,480,000