Common$-$size statement analysis$$A$$ common$-$size income statement for Creek$$ Enterprises' $20212021$ operations follows LOADING... $.$ Using the$$ firm's $20222022$ income statement LOADING... $,$ develop the $20222022$common$-$size income statement and compare it to the$20212021$common$-$size statement. Which areas require further analysis and$$ investigation?

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Part $1$

Complete the$$ common$-$size income statement for the year ending December$31,20222022$ and compare it to the$$ common$-$size income statement for the year ending December $20212021$: $($Enter as a percent and round to one decimal$$ place.$)$

Creek Enterprises

Common$-$Size Income Statement

for the Years Ended December $31,2021$ and December $2022$

$2022$

$2021$

Sales revenue

$\%$

$100\mathrm{.}0$

$\%$

Less: Cost of goods sold

$65\mathrm{.}8$

Gross profits

$\%$

$34\mathrm{.}2$

$\%$

Less: Operating expenses

Selling expense

$\%$

$13\mathrm{.}1$

$\%$

General and administrative expenses

$6\mathrm{.}4$

Lease expense

$0\mathrm{.}3$

Depreciation expense

$3\mathrm{.}7$

Total operating expense

$23\mathrm{.}5$

Operating profits

$\%$

$10\mathrm{.}7$

$\%$

Less: Interest expense

$1\mathrm{.}9$

Net profits before taxes

$\%$

$8\mathrm{.}8$

$\%$

Less: Taxes $($rate $=21\%)$

$1\mathrm{.}8$

Net profits after taxes

$\%$

$7\mathrm{.}0$

$\%$

Less: Preferred stock dividends

$0\mathrm{.}2$

Earnings available for common stockholders

$\%$

$6\mathrm{.}8$

$\%$

Part $2$

Provide your evaluation based on the$$ common$-$size income$$ statements: $($Select all the choices that$$ apply.$)$

A$.$

Selling expense has increased due to the increase in cost of goods sold.

B$.$

Sales have declined and cost of goods sold has increased as a percentage of$$ sales, probably due to a loss of productive efficiency.

C$.$

The level of interest as a percentage of sales has increased$$ significantly; this suggests that the firm has too much debt.

D$.$

Operating expenses have decreased as a percentage of$$ sales; this appears favorable unless this decline has contributed toward the fall in sales.

E$.$

Further analysis should be directed at the increased cost of goods sold and the high debt level.

$)$

Creek Enterprises Income Statement for the Year Ended December$31,20212021$

$(\%)$

$(\%)$

Sales revenue $($$ $35$ comma $024$ comma $000$$$35,024,000)$

$100\mathrm{.}0100\mathrm{.}0$

$$Less: Cost of goods sold

$65\mathrm{.}865\mathrm{.}8$

Gross profits

$34\mathrm{.}234\mathrm{.}2$

$$Less: Operating expenses

Selling expense

$13\mathrm{.}113\mathrm{.}1$

General and administrative expenses

$6\mathrm{.}46\mathrm{.}4$

Lease expense

$0\mathrm{.}30\mathrm{.}3$

Depreciation expense

$3\mathrm{.}73\mathrm{.}7$

Total operating expense

$23\mathrm{.}523\mathrm{.}5$

Operating profits

$10\mathrm{.}710\mathrm{.}7$

$$Less: Interest expense

$1\mathrm{.}91\mathrm{.}9$

Net profits before taxes

$8\mathrm{.}88\mathrm{.}8$

$$Less: Taxes $($rate equals $21\%$rate$=21\%)$

$1\mathrm{.}81\mathrm{.}8$

Net profits after taxes

$7\mathrm{.}07\mathrm{.}0$

$$Less: Preferred stock dividends

$0\mathrm{.}20\mathrm{.}2$

Earnings available for common stockholders

$6\mathrm{.}86\mathrm{.}8$

Creek Enterprises Income Statement for the Year Ended December$31,20222022$

Sales revenue

$ $30$ comma $007$ comma $000$$$30,007,000$

$$Less: Cost of goods sold

$21$ comma $027$ comma $00021,027,000$

Gross profits

$ $8$ comma $980$ comma $000$$$8,980,000$

$$Less: Operating expenses

Selling expense

$ $3$ comma $010$ comma $000$$$3,010,000$

General and administrative expenses

$1$ comma $809$ comma $0001,809,000$

Lease expense

$178$ comma $000178,000$

Depreciation expense

$998$ comma $000998,000$

Total operating expense

$5$ comma $995$ comma $0005,995,000$

Operating profits

$ $2$ comma $985$ comma $000$$$2,985,000$

$$Less: Interest expense

$951$ comma $000951,000$

Net profits before taxes

$ $2$ comma $034$ comma $000$$$2,034,000$

$$Less: Taxes $($rate equals $21\%$rate$=21\%)$

$427$ comma $140427,140$

Net profits after taxes

$ $1$ comma $606$ comma $860$$$1,606,860$

$$Less: Preferred stock dividends

$95$ comma $00095,000$

Earnings available for common stockholders

$ $1$ comma $511$ comma $860$$$1,511,860$