Verifine 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 Verifine Used Auto Sales. The first column of each statement should present Verifine Used Auto Sales’ common-size statement and the second column should show the industry averages.
2. For the profitability analysis, examine Verifine 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 Verifine Used Auto Sales’ profit performance better or worse than the industry average?
3. For the analysis of financial position, examine Verifine 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 Verifine Used Auto Sales’ financial position better or worse than the industry average?

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Verifine 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 VERIFINE AVERAGE $548,000 100.0% 348,528 62.1% 199,472 37.9% 122,752 27.8% 76,720 10.1% 1,096 0.4% $ 75,624 9.7% Veriline Used Auto Sales Balance Sheet Compared with Industry Average December 31, 2010 INDUSTRY VERIFINE AVERAGE Current Assets $229,034 70.9% Plant Assets, Net 50,830 23.6% Intangible Assets, Net Other Assets 8,970 0.8% 10,166 4.7% Total Assets $299,000 100.0% Current Liabilities $118,105 48.1% Long-Term Liabilities 50,830 16.6% Stockholders' Equity 130,065 35.3% Total Liabilities and Stockholders' Equity $299,000 100.0%