Common-size statement analysisA common-size income statement for Creek Enterprises' 2018 operations follows:

Creek Enterprises

Income Statement

for the Year Ended December 31, 2018

Sales revenue ($35,001,000)

100.0%

Less: Cost of goods sold

65.2

Gross profits

34.8%

Less: Operating expenses

Selling expense

12.4%

General and administrative expenses

6.2

Lease expense

0.5

Depreciation expense

3.6

Total operating expense

22.7

Operating profits

12.1%

Less: Interest expense

1.9

Net profits before taxes

10.2%

Less: Taxes (rate=40%)

4.1

Net profits after taxes

6.1%

Less: Preferred stock dividends

0.2

Earnings available for common stockholders

5.9%

. Using the firm's 2019 income statement:

Creek Enterprises Income Statement for the Year Ended December 31, 2019

Sales revenue

$30,050,000

Less: Cost of goods sold

20,984,000

Gross profits

$9,066,000

Less: Operating expenses

Selling expense

$2,953,000

General and administrative expenses

1,785,000

Lease expense

173,000

Depreciation expense

1,028,000

Total operating expense

5,939,000

Operating profits

$3,127,000

Less: Interest expense

1,006,000

Net profits before taxes

$2,121,000

Less: Taxes

(rate=40%)

848,400

Net profits after taxes

$1,272,600

Less: Preferred stock dividends

72,000

Earnings available for common stockholders

$1,200,600

develop the 2019 common-size income statement and compare it to the 2018 statement.

Which areas require further analysis and investigation?

Question content area bottom

Part 1

Complete the common-size income statement for the year ending December 31, 2019, and compare it to the common-size income statement for the year ending December 2018:

(Round to one decimal place.)

Creek Enterprises
Common-Size Income Statement
for the Years Ended December 31, 2018 and December 2019
	2019				2018
Sales revenue				%			100.0	%
Less: Cost of goods sold							65.2
Gross profits				%			34.8	%
Less: Operating expenses
Selling expense		%			12.4	%
General and administrative expenses					6.2
Lease expense					0.5
Depreciation expense					3.6
Total operating expense							22.7
Operating profits				%			12.1	%
Less: Interest expense							1.9
Net profits before taxes				%			10.2	%
Less: Taxes (rate = 40%)							4.1
Net profits after taxes				%			6.1	%
Less: Preferred stock dividends							0.2
Earnings available for common stockholders				%			5.9	%