Top managers of Medical Products Inc. have asked for your help in comparing the company's profit performance and financial position with the average for the industry. The accountant has given you the company's income statement and balance sheet and also the following data for the industry:

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

Transcribed Image Text:

Medical Products Inc. Income Statement Compared With Industry Average For the Year Ended December 31, 2014 Medical Products Industry Average Net sales Cost of goods sold Gross profit Operating expenses Operating income Other expenses Net income $957,000 652,000 305,000 200,000 105,000 3,000 $102,000 100.0% 55.9 44.1 28.1 16.0 2.4 13.6% Medical Products Inc. Balance Sheet Compared With Industry Average As at December 31, 2014 Medical Products Industry Average 74.4% 20.0 0.6 5.0 100.0% Current assets 5486,000 117,000 24,000 3,000 5630,000 assets, net Intangible assets, net Other assets Total Current liabilities Long-term liabilities Shareholders' equity Total $245,000 114,000 271,000 $630,000 45.6% 19.0 35.4 100.0%