Top managers of Ryan Products, Inc., have asked you to compare the company’s profit performance and financial position with the average for the industry. The company’s accountant has given you the business’s income statement, balance sheet, and industry data:

Requirements

1. Prepare a common-size income statement and balance sheet for Ryan Products. The first column of each statement should present the company’s common-size statement, and the second column should show the industry averages.

2. For the profitability analysis, compare the company’s

(a) Ratio of gross profit to net sales,

(b) Ratio of operating income to net sales,

(c) Ratio of net income to net sales with the industry averages. Is the company’s profit performance better or worse than the average for the industry?

3. For the analysis of financial position, calculate Ryan Products’

(a) Ratios of current assets and current liabilities to total assets

(b) Ratio of stockholders’ equity to total assets.

Compare these ratios with the industry averages. Is the company’s financial position better or worse than the average for the industry?

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A1 Ryan Products, Inc. Income Statement Compared with Industry Average Year Ended December 31, 2018 |Industry Average 100.0% 57.3 42.7 29.4 13.3 2.5 Ryan $ 500,000 355,000 145,000 120,000 25,000 7,500 $ 17,500 2 3 Net sales 4 Cost of goods sold 5 Gross profit 6 Operating expenses 7 Operating income 8 Other expenses 9 Net income 10.8% 10 A1 Ryan Products, Inc. Balance Sheet Compared with Industry Average December 31, 2018 Industry Average 2 3 Current assets 4 Plant assets, net 5 Intangible assets, net 6 Other assets 7 Total Ryan $ 496,400 121,040 27,200 35,360 $ 680,000 72.1% 19.0 4.8 4.1 100.0% 9 Current liabilities 10 Long-term liabilities 11 Stockholders' equity 12 Total 13 $ 266,560 144,160 269,280 $ 680,000 47.2% 21.0 31.8 100.0%