The Western Farm Supplies Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and balance sheet, as well as the industry average data for retailers:

Required

1. Prepare a vertical analysis for Western for both its income statement and balance sheet. Round all answers to one decimal place.

2. Compare the company’s gross margin percentage with the average for the industry. Comment on their investment in assets and the amount of current liabilities compared to the industry information shown.

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WESTERN FARM SUPPLIES INC. Income Statement Compared with Industry Average For the Year Ended December 31, 2020 Western Farm Industry Average Net sales $782,000 100.0% Cost of goods sold Gross margin 528,632 65.8 253,368 34.2 Operating expenses 163,438 19.7 Operating income Other expenses 89,930 14.5 4,692 0.4 Net income $ 85,238 14.1%