From Book: Common-Sized Financial Statements (LO 9.7) Eikner, Inc. operates two small clothing stores in southeastern Idaho. Following are this company's income statements for the years ended December 31, 2006 through 2008, and year-end balance sheets for 2006 through 2008. Eikner, Inc. Income Statements For the Years Ended December 31, 2006-2008 Sales* Cost of goods Sold Gross Profit Operating Expenses Operating Income Other Revenue (Expense)** Income before Income Tax Income Tax Expense Net Income *All of the company's sales are on a credit basis. 2006 2007 2008 $641,900 $652,000 $654,500 (304,500) (323,700) (339,200) $337,400 $328,300 $315,300 (154,200) (155,800) (161,900) $183,200 $172,500 $153,400 13,400 (6,400) (1,200) $196,600 $166,100 $152,200 (78,600) (66,400) (60,900) $118.000 $99.700 $ 91.300 **Includes interest expense of the following amounts: $8,900 (2000); $7,400 (2001); and $7,100 (2002). Eikner, Inc. Balance Sheets December 31, 2006-2008 2006 2007 2008 ASSETS Cash Accounts Receivable (net) $ 22.000 72,500 $ 9,100 103,300 $ 3,700 116,900 Inventory 109,800 102,000 89,000 Prepaid Expenses 2,500 1,400 1,700 Total Current Assets $206,800 $215,800 $211,300 Property & Equipment (net) 212,000 201,500 189,400 Other Assets 3,200 Total Assets $422.000 2,600 $419,900 1,500 $402.200 LIABILITIES Accounts Payable Notes Payable Accrued Liabilities $51,900 $57,200 $ 64,900 25,000 41,100 15,000 35,800 12,000 7,400 Total Current Liabilities $118,000 $108,000 $ 84.300 Bonds Payable Total Liabilities 100,000 $218,000 80,000 $188,000 STOCKHOLDERS' EQUITY Common Stock $ 50.000 $ 50,000 80,000 $164,300 $ 50,000 Additional Paid-in Capital 130,000 130,000 130,000 Retained Earnings 24,000 51,900 57,900 Total Stockholders' Equity $204,000 $231,900 $237,900 Total Liabilities and Stockholders' Equity $422.000 $419,900 $402.200 Required: (a) Prepare common-sized income statements for Eikner, Inc. for 2006 through 2008. (b) What major structural changes occurred over this three-year period in Eikner's income statement data? Are these changes apparently favorable or unfavorable? Explain. After solving parts (a) and (b), answer the following multiple choice question: Operating income as a percentage of sales was highest in which year? 2005 2006 2007 2008