Common-size statement analysis A common-size income statement for Creek Enterprises 2014 operations follows. Using the firms 2015 income statement presented in Problem 318, develop the 2015 common-size income statement and compare it with the 2014 statement. Which areas require further analysis and investigation?

CREEK ENTERPRISES COMMON-SIZE BALANCE SHEET

FOR YEAR ENDING DECEMBER 31, 2014

SALES REVENUE ($35,000,000) 100%

LESS; COGS 65.9%

GROSS PROFIT 34.1%

LESS: OPERATING EXPENSE

SELLING EXPENSE 12.7%

GENERAL & ADMIN EXPENSE 6.3

LEASE EXPENSE 0.6

DEPRECIATION EXPENSE 3.6

TOTAL OPERATING EXPENSES 23.2

OPERATION PROFITS 109%

LESS: INTEREST EXPENSE 1.5

NET PROFIT BEFORE TAXES 9.4 %

LESS: TAXES (RATE = 40 %) 3.8

NET PROFIT AFTER TAXES 5.6%

LESS: PREFERRED STOCK DIVIDENDS 0.1

EARNINGS AVAILABLE FOR COMMON

STOCKOLDERS 5.5%