PREPARING COMMON SIZE STATEMENTS The financial statements for Jane’s Shoes, Inc., appear below and on the next page:

Jane’s Shoes, Inc.

Income Statement

(In thousands, except per share data)

Year Ended December 31, 2009 2008 2007 Revenues $3,930,984 $3,405,211 $3,003,610 Costs and expenses:

Cost of goods sold $2,386,993 $2,089,089 $1,850,530 Selling and administrative 922,261 761,498 664,061 Interest 25,739 30,665 27,316 Other expenses (income) 1,475 2,141 (43)

Total costs and expenses $3,336,468 $2,883,393 $2,541,864 Income before income taxes $ 594,516 $ 521,818 $ 461,746 Income taxes 229,500 192,600 174,700 Net income $ 365,016 $ 329,218 $ 287,046 Jane’s Shoes, Inc.

Balance Sheets

(In thousands)

December 31, ASSETS 2009 2008 Current assets:

Cash and equivalents $ 291,284 $ 260,050 Accounts receivable, less allowance for doubtful accounts of $19,447 and

$20,046 667,547 596,018 Inventories 592,986 471,202 Deferred income taxes 26,378 27,511 Prepaid expenses 42,452 32,977 Total current assets $1,620,647 $1,387,758 ASSETS 2009 2008 Property, plant, and equipment $ 571,032 $ 497,795 Less accumulated depreciation 193,037 151,758 Net property, plant, and equipment $ 377,995 $ 346,037 Goodwill 157,894 110,363 Other assets 30,927 28,703 Total assets $2,187,463 $1,872,861 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities:
Current portion of long-term debt $ 52,985 $ 3,652 Notes payable 108,165 105,696 Accounts payable 135,701 134,729 Accrued liabilities 138,563 134,089 Income taxes payable 17,150 42,422 Total current liabilities $ 452,564 $ 420,588 Long-term debt 15,033 77,022 Noncurrent deferred income taxes 29,965 27,074 Other noncurrent liabilities 43,575 23,728 Commitments and contingencies — —
Redeemable preferred stock 300 300 Total liabilities $ 541,437 $ 548,712 Shareholders’ equity:
Common stock at stated value:
Class A convertible—26,691 and 26,919 shares outstanding $ 159 $ 161 Class B—49,161 and 48,591 shares outstanding 2,720 2,716 Capital in excess of stated value 108,451 93,799 Treasury stock (common at cost) (7,790) (6,860)
Retained earnings 1,542,486 1,234,333 Total shareholders’ equity $1,646,026 $1,324,149 Total liabilities and shareholders’ equity $2,187,463 $1,872,861 Required:
. Prepare common income statements to be used for horizontal analysis for Jane’s Shoes for 2007 to 2009.
. Indicate why Jane’s net income increased between 2007 and 2009.
. Prepare common size balance sheets to be used for vertical analysis for 2009 and 2008.
. Indicate whether the proportion of dollars invested in the various categories of assets has changed significantly between 2008 and 2009.
. Indicate whether the proportion of capital raised from the various liability categories and common shareholders’ equity has changed significantly between 2008 and 2009.
. Describe Jane’s performance and financial position.