P12-58B. (Learning Objectives 3, 4: Preparing common-size statements; analyzing portability;

making comparisons with the industry) Top managers of Walsh 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 the following data for the industry:

Requirements 1. Prepare a common-size Income Statement and Balance Sheet for Walsh Products. The first column of each statement should present Walsh Products’ common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compute Walsh Products’

(a) gross profit margin,

(b) operating profit margin, and

(c) net profit margin. Compare these figures with the industry averages. Is Walsh Products’ profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compute Walsh Products’

(a) current ratio,

(b) quick ratio, and

(c) debt ratio. Compare these ratios with the industry averages. Is Walsh Products’
financial position better or worse than the average for the industry?

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A1 Walsh Products, Inc. Income Statement Compared with Industry Average Year Ended December 31, 20X6 1 2 3 Net sales 4 Cost of goods sold 5 Gross profit 6 Operating expenses 7 Operating income 8 Other expenses 9 Net income 10 Walsh Industry Average $ 910,000 100.0% 655,200 57.3 254,800 42.7 218,400 29.4 36,400 13.3 13,650 2.5 $ 22,750 10.8%