P12-52A. (Learning Objectives 3, 4: Preparing common-size statements; analyzing profitability; making comparisons with the industry) Top managers
Question:
P12-52A. (Learning Objectives 3, 4: Preparing common-size statements; analyzing profitability;
making comparisons with the industry) Top managers of McDonough 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 McDonough Products.
The first column of each statement should present McDonough Products’ common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compute McDonough Products’
(a) gross profit margin (b)
operating profit margin, and
(c) net profit margin. Compare these figures with the industry averages. Is McDonough Products’ profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compute McDonough Products’
(a) current ratio,
(b) quick ratio, and
(c) debt ratio. Compare these ratios with the industry averages. Is McDonough Products’ financial position better or worse than the average for the industry?
Step by Step Answer:
Financial Accounting International Financial Reporting Standards Global Edition
ISBN: 9781292211145
11th Edition
Authors: Charles T. Horngren, C. William Thomas, Wendy M. Tietz, Themin Suwardy, Walter T. Harrison