Given the following condensed income statement data, answer the following questions:

1. Prepare comparative common-sized income statements for each company. Round percentages to one decimal place.
2. Use the common-sized analysis to compare the financial performance of the three companies. Make management conclusions in complete sentence format, using clarity and detail. Use correct spelling and grammar.

Part A - Data: The condensed income statements through operating income for Amazing, Inc., Best Barn, Inc., and Whatamega, Inc., for a recent fiscal year follow (in millions):

Amazing, Inc.	Best Barn, Inc.	Whatamega, Inc.
Sales	$135,987	$39,403	$485,873
Cost of sales	(88,265)	(29,963)	(361,256)
Gross profit	$47,722	$9,440	$124,617
Selling, general, and administrative expenses	(43,369)	(7,547)	(101,853)
Operating expenses	(167)	(39)	0
Operating income	$4,186	$1,854	$22,764

Part B - Kingwood International, Inc. and Just Like Our Home, Inc. are two major owners and managers of lodging and resort properties in the United States. Given Kingwood International, Inc and Just Like Our Home, Inc’s data, answer the following questions:

1. Determine the following ratios for both companies. Round ratios and percentages to one decimal place. Show step-by-step process, including formulas. Type management’s conclusion in complete sentence structure. (Example: Kingwood International, Inc.’s return on total assets is X% and Just Like Our Home, Inc.’s return on total assets is Y%.)

1. Return on total assets
2. Return on stockholders’ equity
3. Times interest earned
4. Ratio of total liabilities to stockholders’ equity

2. Based on the information in (1), analyze and compare the two companies’ solvency and profitability. Write management conclusion with complete clarity and detail, using complete sentence structure, correct spelling and grammar.

Part B – Data:

Abstracted income statement information for the two companies is as follows for a recent year (in millions):

Kingwood Intl Inc.	Just Like Our Home Inc.
Operating profit before other revenue and interest	$1,368	$299
Other revenue (expense)	50	66
Interest expense	(234)	(76)
Income before income tax expense	$1,184	$289
Income tax expense	(404)	(85)
Net income	$780	$204

Balance sheet information is as follows (in millions):

Kingwood Intl Inc.	Just Like Our Home Inc.
Total liabilities	$18,783	$3,841
Total stockholders’ equity	5,357	3,908
Total liabilities and stockholders’ equity	$24,140	$7,749

The average liabilities, average stockholders’ equity, and average total assets are as follows (in millions):

Kingwood Intl Inc.	Just Like Our Home Inc.
Average total liabilities	$14,228	$3,719
Average total stockholders’ equity	883	3,951
Average total assets	15,111	7,670

Answer rating: 100% (QA)

Answer to Part A Common Size income Statement of Amazing Inc Income Common Size Statement In Income ... View the full answer