(Learning Objectives 3, 4: Preparing common-size statements; analyzing profi tability; making comparisons with the industry) Top managers of McDonough Products, Inc., have asked for your help in comparing the company’s profi t performance and fi nancial 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 fi rst column of each statement should present McDonough Products’ common-size statement, and the second column should show the industry averages.
2. For the profi tability analysis, compute McDonough Products’

(a) gross profi t margin (b)
operating profi t margin, and

(c) net profi t margin. Compare these fi gures with the industry averages. Is McDonough Products’ profi t performance better or worse than the average for the industry?
3. For the analysis of fi nancial position, compute McDonough Products’

(a) current ratio,

(b) quick ratio, and

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