Korman Ltd. has asked for your help in comparing the company's profit performance and financial position with the computer services industry average. The manager has given you the company's income statement and balance sheet, and also the following industry average data for computer services companies:

Korman Ltd.
Income Statement
For the Year Ended December 31, 2020
		Industry
	Korman Ltd.	Average
Net sales	$427,000	100.00%
Cost of goods sold	255,000	53.2
Gross margin	172,000	46.8
Operating expenses	92,000	21.3
Operating income	80,000	25.5
Other expenses	29,000	5.2
Net income	$51,000	20.30%

Korman Ltd.
Balance Sheet
31-Dec-20
		Industry
	Korman Ltd.	Average
Current assets	$162,750	62.50%
Property and equip., net	87,000	35.2
Other assets	6,900	2.3
Total assets	$256,650	100.00%
Current liabilities	$121,000	42.50%
Long-term liabilities	65,000	32.5
Shareholders' equity	70,650	25
Total liabilities and shareholders' equity	$256,650	100.00%

1.	Make a two-column common-size income statement and a two-column common-size balance sheet for Korman Ltd. The first column of each statement should present Korman Ltd.'s common-size statement, and the second column should show the industry averages.
2.	For the profitability analysis, compare each of Korman Ltd.'s (a) ratio of gross margin to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures to the industry averages. Is Korman Ltd.'s profit performance better or worse than the industry average?
3.	For the analysis of financial position, compare each of Korman Ltd.'s (a) ratio of current assets to total assets, and (b) ratio of shareholders' equity to total assets to the industry averages. Is Korman Ltd.'s financial position better or worse than the industry averages?

Requirement 1. Prepare a two-column common-size income statement and a two-column common-size balance sheet for Korman Ltd. The first column of each statement should present Korman

Ltd.'s common-size statement, and the second column should show the industry averages.Begin with the common-size income statement. (Round all percentages to one decimal place. In order to avoid rounding issues, complete each line individually. The total of the column may not add up to 100.0.)

Korman Ltd.
Common-Size Income Statement Compared to Industry Average
For the Year Ended December 31, 2020
			Korman Ltd.	Industry
			(%)	Average (%)
		Net sales		100
		Cost of goods sold		53.2
		Gross margin		46.8
		Operating expenses		21.3
		Operating income		25.5
		Other expenses		5.2
		Net income		20.3

Make a common-size balance sheet for Korman Ltd. (Round all percentages to one decimal place. In order to avoid rounding issues, complete each line individually. The total of the column may not add up to 100.0.)

Korman Ltd.
Common-Size Balance Sheet Compared to Industry Average
31-Dec-20
			Korman Ltd.	Industry
			(%)	Average (%)
		Current assets	62.5
		Property and equipment, net	35.2
		Other assets	2.3
		Total assets	100
		Current liabilities	42.5
		Long-term liabilities	32.5
		Shareholders' equity	25
		Total liabilities and shareholders' equity	100

Requirement 2. For the profitability analysis, compare each of Korman Lid.'s (a) ratio of gross margin to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures to the industry averages. Is Korman Lid.'s profit performance better or worse than the industry average? Korman Ltd.'s common-size income statement shows that its ratios of gross margin to net sales, operating income to net sales, and net income to net sales are than the industry averages. The company's profit performance is average for the industry. Requirement 3. For the analysis of financial position, compare each of Korman Lid.'s (a) ratio of current assets to total assets, and (b) ratio of shareholders' equity to total assets to the industry averages. Is Korman Ltd.'s financial position better or worse than the industry averages? Korman Lid.'s common-size balance sheet shows that its ratio of current assets to total assets, and of shareholders' equity to total assets are than the industry averages. Overall, Korman Lid.'s financial position is than average for companies in its industry