One approach to financial statemient analysis is to prepare common-size statements. These statements express each financial statement item as a percentage of some base, such as total assets, total equities, or total revenues. Presented below are common-size balance sheets for Horrigan Corporation as discussed in the chapter.

a Assuming that the ratio analysis presented in the chapter had not yet been performed, what significant changes in the structure of Horrigan Corporation's assets and equities can you observe from the common-size statement above?
b In what respects are the changes observed in part a consistent with the ratio analysis presented in the chapter?
c In what respects are the changes observed in part a inconsistent with the ratio analysis presented in the chapter?

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Horrigan Corporation Common-Size Balance Sheets December 31 ASSETS 1976 1977 1978 1979 Cash 4.0% 2.5% 1.5% 1.5% Marketable Securities 1.0 .3 Accounts Receivable (net) 10.4 9.0 8.8 11.7 Inventories.. 5.6 7.5 8.9 12.8 Total Current Assets 20.0% 20.0% 19.2% 26.3% Land 8.0% 7.5% 11.5% 9.2% Building 60.0 37.5 28.9 29.2 Equipment 28.0 48.0 53.1 48.2 Less Accumulated Depreciation (16.0) (13.0) (12.7) (12.9) Total Noncurrent Assets 80.0% 80.0% 80.8% 73.7% Total Assets 100.0% 100.0% 100.0% 100.0% LIABILITIES AND STOCKHOLDERS' EQUITY Accounts Payable Salaries Payable Income Taxes Payable Total Current Liabilities Bonds Payable.. 10.0% 7.5% 6.8% 7.7% 4.0 3.3 2.9 3.1 2.0 1.7 1.9 3.0 16.0% 12.5% 11.6% 13.8% 20.0 12.5 19.2 23.1 Total Liabilities 36.0% 25.0% 30.8% 36.9% Common Stock 40.0% 37.5% 30.8% 24.6% Additional Paid-in Capital 8.0 25.0 23.0 18.5 Retained Earnings. 16.0 12.5 15.4 20.0 Total Stockholders' Equity 64.0% 75.0% 69.2% 63.1% Total Liabilities and Stockholders' Equity 100.0% 100.0% 100.0% 100.0%