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. highlight cells according to whether the calculated ratio increases or decreases more than a specified amount. Required: Download spreadsheet CommonSizeCaseData-141986.xlsx formatting to visually differentiate between cells that reflect increases and cells that reflect decreases over a specified percentage. HINT: STEP-BY-STEP WALKTHROUGH can be copied and pasted to all cells? Note that there are negative values in the Financial Statement Data sheet. Choose the correct formula. I. ='Financial Statement Data'!\$B2/'Financial Statement Data'!B2 II. ='Financial Statement Data'!B2/'Financial Statement Data'!\$B2 III. ='Financial Statement Data'!B2/'Financial Statement Data'!B $2 IV. ='Financial Statement Data'!B2/'Financial Statement Data'! $B$2 b. Copy and paste that one formula to all the relevant cells in your new sheet. Round your answers to two decimal places. 2. Vertical analysis: Create another new sheet to perform the vertical analysis, comparing each year's item to that year's net sales: I. =ABS('Financial Statement Data'!\$B2/'Financial Statement Data'!B2) II. =ABS('Financial Statement Data'!B2/'Financial Statement Data'!\$B2) III. =ABS('Financial Statement Data'!B2/'Financial Statement Data'!B\$2) IV. =ABS('Financial Statement Data'!B2/'Financial Statement Data'!\$B\$2) 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. LineItemsNetSalesLess:CostofGoodsSoldGrossMarginLess:TaxesYear1Yess:OperatingExpensesYear2 For cells that have a decrease of less than 95 percent, use a light red fill with dark red text. Choose the table with the correct conditional formatting. I. \begin{tabular}{|l|l|c|c|c|c|c|} \hline \multicolumn{1}{|c|}{ A } & B & C & D & E & F & II \\ \hline 1 & Line Items & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline 2 & Net Sales & & & \\ \hline 3 & Less: Cost of Goods Sold & & & \\ \hline 4 & Gross Margin & & \\ \hline 5 & Less: Operating Expenses & & & \\ \hline 6 & Less: Taxes & & & \\ \hline 7 & Net Income & & & \\ \hline \end{tabular} II. \begin{tabular}{|l|l|c|c|c|c|c|} \hline \multicolumn{1}{|c|}{ A } & \multicolumn{1}{|c|}{ B } & C & D & E & F \\ \hline 1 & Line Items & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline 2 & Net Sales & & & \\ \hline 3 & Less: Cost of Goods Sold & & & \\ \hline 4 & Gross Margin & & & \\ \hline 5 & Less: Operating Expenses & & & \\ \hline 6 & Less: Taxes & & & & \\ \hline 7 & Net Income & & & & \\ \hline \end{tabular} III. \begin{tabular}{|l|l|c|c|c|c|c|} \hline \multicolumn{1}{|c|}{ A } & B & C & D & E & F & IV. \\ \hline 1 & Line Items & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline 2 & Net Sales & & & \\ \hline 3 & Less: Cost of Goods Sold & & & \\ \hline 4 & Gross Margin & & & \\ \hline 5 & Less: Operating Expenses & & & \\ \hline 6 & Less: Taxes & & & & \\ \hline 7 & Net Income & & & \\ \hline \end{tabular} \begin{tabular}{|l|l|c|c|c|c|c|} \hline \multicolumn{1}{|c|}{ A } & B & C & D & E & F \\ \hline 1 & Line Items & Year 1 & Year 2 & Year 3 & Year 4 & Year 5 \\ \hline 2 & Net Sales & & & \\ \hline 3 & Less: Cost of Goods Sold & & \\ \hline 4 & Gross Margin & & \\ \hline 5 & Less: Operating Expenses & & \\ \hline 6 & Less: Taxes & & & \\ \hline 7 & Net Income & & & \\ \hline \end{tabular} 4. 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