Preparing common-size income statement Data for Connor, Inc. and Alto Corp.follo
ID: 2594572 • Letter: P
Question
Preparing common-size income statement Data for Connor, Inc. and Alto Corp.follow Connor Alto Net Sales Revenue Cost of Goods Sold Other Expenses Net Income s13,000 $ 22,000 7,917 15,730 4,342 5,170 S 741 1,100 Requirements 1. Prepare common-size income statements. 2. Which company earns more net income? 3. Which company's net income is a higher percentage of its net sales revenuc? Use the following information for Short Exercises S17-6 through $17-10 Accel's Companies, a home improvement store chain, reported the following summarized figures: ACCEL'S COMPANIES Income Statement Years Ended May 31, 2018 and 2017 2018 $40,600 28,400 2017 40,500 30,600 Net Sales Revenue Cost of Goods Sold Interest Expense All Other Expenses Net Income 570 600 8,200 4,300 S1,130 $ 7,300Explanation / Answer
1- common size income statement
connor
% of sales = individual item value/sales value
Alto
% of sales = individual item value/sales value
net sales revenue
13000
100%
22000
100%
cost of goods sold
7917
60.90%
15730
71.50%
other expenses
4342
33.40%
5170
23.50%
net income
741
5.70%
1100
5.00%
2-
Alto earned more income in value
3-
Conor earned more income in % in terms of sales
2018
2017
2017
2-
current ratio
current assets/current liabilities
52800/41900
1.260143
25200/23500
1.07234
it has improved over the year
3-
inventory turnover
cogs/average inventory
28400 /(7500+5200)/2
28400/7750
3.664516
days sales in inventory
365/inventory turnover ratio
365/4.472
81.61896
Gross profit margin
gross profit /sales
(40600-28400)/40600
30%
4-
days sales in receivables
365/receivable turnover ratio
365/6.425
56.80934
receivable turnover ratio
sales/average accounts receivables
40800/(7500+5200/2)
6.425197
companies receivable turnover ratio is 57.8 days and sales outstaningin days is 81.61 days
5-
debt ratio
total of liabilities /total assets
41900/82800
50.60%
debt to equity ratio
total of liabilities /total equity
41900/40900
1.02445
it is weak because company is more leverged
6-
profit margin
net income/sales
7300/40600
17.98%
return ontotal assets
net income/average total assets
7300/68500
10.66%
average assets
(82800+54200)/2
68500
asset turnover ratio
sales/average total assets
40800/68500
0.59562
return on equity
net income/average equity
7300/35800
20.39%
average equity
40900+30700)/2
35800
All these rate of returns are strong as it is greater than previous year and all are positive
1- common size income statement
connor
% of sales = individual item value/sales value
Alto
% of sales = individual item value/sales value
net sales revenue
13000
100%
22000
100%
cost of goods sold
7917
60.90%
15730
71.50%
other expenses
4342
33.40%
5170
23.50%
net income
741
5.70%
1100
5.00%
2-
Alto earned more income in value
3-
Conor earned more income in % in terms of sales
2018
2017
2017
2-
current ratio
current assets/current liabilities
52800/41900
1.260143
25200/23500
1.07234
it has improved over the year
3-
inventory turnover
cogs/average inventory
28400 /(7500+5200)/2
28400/7750
3.664516
days sales in inventory
365/inventory turnover ratio
365/4.472
81.61896
Gross profit margin
gross profit /sales
(40600-28400)/40600
30%
4-
days sales in receivables
365/receivable turnover ratio
365/6.425
56.80934
receivable turnover ratio
sales/average accounts receivables
40800/(7500+5200/2)
6.425197
companies receivable turnover ratio is 57.8 days and sales outstaningin days is 81.61 days
5-
debt ratio
total of liabilities /total assets
41900/82800
50.60%
debt to equity ratio
total of liabilities /total equity
41900/40900
1.02445
it is weak because company is more leverged
6-
profit margin
net income/sales
7300/40600
17.98%
return ontotal assets
net income/average total assets
7300/68500
10.66%
average assets
(82800+54200)/2
68500
asset turnover ratio
sales/average total assets
40800/68500
0.59562
return on equity
net income/average equity
7300/35800
20.39%
average equity
40900+30700)/2
35800
All these rate of returns are strong as it is greater than previous year and all are positive