A common-size income statement for Santa Enterprises’ 2017 operations follows. Using the firm’s 2017 income statement, develop the 2017 common-size income statement and compare it with the 2016 statement. Which areas require further analysis and investigation?

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Santa Enterprises Common-Size Income Statement for the Year Ended December 31, 2016 Sales revenue ($7,100,000) Less: Cost of goods sold Gross profits Less: Operating expenses Sales and marketing expenses Lease payments Depreciation expense Total operating expense Operating profits Less: Interest expense Net profit before taxes Less: Taxes (Rate = 30%) Net profit after taxes Less: Preferred stock dividends Retained profits 100.0% 58.5 41.5% 14.1% 5.5 3.4 23.0% 18.5% 3.5 15.0% 3.0 12.0% 2.8 9.2% Santa Enterprises Income Statement for the Year Ended December 31, 2017 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Sales and marketing expenses Lease payments Depreciation expense Total operating expense Operating profits Less: Interest expense Net profit before taxes Less: Taxes (Rate = 30%) Net profit after taxes Less: Preferred stock dividends Retained profits 6,200,000 3,900,000 2,300,000 590,000 210,000 1,000,000 1,800,000 500,000 240,000 260,000 52,000 208,000 92,000 116,000