Preparing Common Size Statements}

The financial statements for Lynch Shoes Inc. follow:

\section*{Required:}
1. Prepare common size statement of earnings to be used for horizontal analysis for Lynch for 2016 to 2018 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.
2. CONCEPTUAL CONNECTION Indicate why Lynch's net income increased between 2016 and 2018.
3. Prepare common size statements of financial position to be used for vertical analysis for 2018 and 2017 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.
4. Indicate whether the proportion of dollars invested in the various categories of assets has changed significantly between 2017 and 2018.
5. Indicate whether the proportion of capital raised from the various liability categories and common shareholders' equity has changed significantly between 2017 and 2018.
6. CONCEPTUAL CONNECTION Describe Lynch's performance and financial position.

\section*{OBJECTIVE 4 Problem

Transcribed Image Text:

Lynch Shoes Inc. Consolidated Statements of Eamings (in thousands, except per share data) Year Ended December 31, Revenues Costs and experses: Cost of goods sold Selling and administrative interest Other expenses (income) Total costs and expenses Income before income taxes Income taxes Net income 2018 2017 2016 53,930,984 $3,405,211 $3,003,610 2,386,993 922,261 2,089,089 1,850,530 761,498 664,061 25,739 30.665 27,316 1,475 2,141 (43) 3,336,468 2,883,393 2,541,864 594,516 521,818 229,500 $ 365,016 192,600 $ 329,218 461,746 174,700 $ 297,066