Love Bug Used Auto Sales asked for your help in comparing the company’s profit performance and financial position with the average for the auto sales industry. The proprietor has given you the company’s income statement and balance sheet as well as the industry average data for retailers of used autos.

Requirements 1. Prepare a two-column, common-size income statement and a two-column, common-size balance sheet for Love Bug Used Auto Sales. The first column of each statement should present Love Bug Used Auto Sales’ common-size statement and the second column should show the industry averages.
2. For the profitability analysis, examine Love Bug Used Auto Sales’

(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 averages. Is Love Bug’s profit performance better or worse than the industry average?
3. For the analysis of financial position, examine Love Bug Used Auto Sales’

(a) ratio of current assets to total assets, and

(b) ratio of stockholders’ equity to total assets. Compare these ratios with the industry averages. Is Love Bug Used Auto Sales’ financial position better or worse than the industry average?

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Love Bug Used Auto Sales Income Statement Compared with Industry Average Year Ended December 31, 2010 Net Sales Cost of Goods Sold Gross Profit Operating Expenses Operating Income Other Expenses Net Income INDUSTRY LOVE BUG AVERAGE $521,000 100.0% 331,000 62.1% 190,000 37.9% 110,000 27.8% 80,000 10.1% 3,000 0.4% $ 77,000 9.7%