Common-Size Financial Statement Analysis Using Excel Completing this activity will help you learn to: 1. create Excel formulas using cell references. 2. create absolute cell references to perform calculations efficiently and correctly. 3. apply conditional formatting to highlight cells based on criteria that you specify. Case scenario: You are working at a small business that has been mostly stable. You want to analyze the financial statements of the past five years to examine the trends over time and compare the percentages of income statement items relative to overall sales. You also want to highlight cells according to whether the calculated ratio increases or decreases more than a specified amount. Required: Download spreadsheet CommonSizeCaseData-09d110,xisx You will build a spreadsheet that performs common-size analysis using five years of a company's income statements. Specifically, you will create two sheets within the workbook, one for the horizontal analysis and one for the vertical analysis. Further, you will use conditional formatting to visually differentiate between celis that reffect increases and celis that reflect decreases over a specified percentage. HINT: STEP-BY-STEP WALKTHROUGH 1. Horizontal analysis: Create a new sheet within your Excel workbook that you will use to perform the horizontal analysis, comparing each year's income statement item to its corresponding item in year 1. Copy column A from the Financial Statement Data sheet to Column A in your new sheet. Also copy the information in row 1 to row 1 in your new sheet so that the basic structure of the table will be the same in the new sheet but it. will have no data. a. Now create formulas in your new sheet using the data in the Financial Statement Data sheet that will reflect the correct percentages as described in the previous question. Instead of creating every formula one by one, how could you create just one formula in cell 82 that can be copied and pasted to all cells? Note that there are negative values in the Financial Statement Data shect. Choose the correct formula. 1. ='Financial Statement Data'IsB2/'Financial Statement Data'IB2 II. ='Financial Statement Data'iB2/'Financial Statement Data'ISB2 III. ='Financial Statement Data'B B2/'Financial Statement Data'IBs2 IV. ='Financial Statement Data'/B2/Financial Statement Data'15B\$2 II b. Copy and paste that one formula to all the relevant cells in your new sheet. Round your answers to two decimal places. ar 1 \begin{tabular}{rrrrr} Year 2 & & Year 3 & Year 4 & Year 5 \\ \hline & % & 100 & % & \end{tabular} % % % % % % % % % % % % % % % % % % % % % % % % % b. Again, copy and paste that one formula to all the relevant cells in your new sheet. Round your answers to two decimal places. Enter all percentages as positive numbers. Explain the use of the common size financial statements. If you were a manager, which area would require further analysis? The input in the box below will not be graded, but may be reviewed and considered by your instructor