Hoosier Auto Sales asked for your help in comparing the company's profit performance and financial position with the average for the auto sales industry. The owner has given you the company's income statement and balance sheet as well as the industry average data for retailers of used autos. (Click the icon to view the income statement.) Read the requirements. (Click the icon to view the balance sheet.) Requirement 1. Prepare a two-column, common-size income statement and a two-column common-size balance sheet for Hoosier Auto Sales. The first column of each statement should present Hoosier Auto Sales' common-size statement and the second column should show the industry averages. (Round the percentages to the nearest one-tenth percent, X.X%.) Start by preparing a common-size income statement for Hoosier Auto Sales. Hoosier Auto Sales Common-Size Income Statement Compared to Industry Average Year Ended December 31, 2018 Hoosier Industry (%) Average (%) Net sales % 100.0 % 64.3 Cost of goods sold % % Gross profit % 35.7 % 27.3 Operating expenses % % Operating income % 8.4 % 1.1 Other expenses % % 7.3 Net income % % Now prepare a common-size balance sheet for Hoosier Used Auto Sales. Hoosier Auto Sales Common-Size Balance Sheet Compared with Industry Average December 31, 2018 Current assets Fixed assets, net Intangible assets, net Other assets Total assets Current liabilities Long-term liabilities Stockholders' equity do do do do Hoosier Industry (%) Average (%) do do do % 77.2% % % 16.3 % 2.8% % 3.7% 100.0 100.0 % % 40.1 % % % 20.3 % 39.6 % 100.0 100.0 Total liabilities and stockholders' equity % % Requirement 2. For the profitability analysis, examine Hoosier Auto Sales' (a) ratio of gross profit to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Hoosier's profit performance better or worse than the industry average? Hoosier's common-size income statement shows that its ratios of (1) gross profit to net sales is worse than the industry average, (b) operating income to net sales is worse than the industry average, and (c) net income to net sales is worse than the industry average. Requirement 3. For the analysis of financial position, examine Hoosier Auto Sales' (a) ratio of current assets to total assets, and (b) ratio of stockholders' equity to total assets. Compare these ratios with the industry averages. Is Hoosier Auto Sales' financial position better or worse than the industry average? Hoosier's common-size balance sheet shows that its ratios of (a) current assets to total assets is worse than the industry average, and (b) stockholders' equity to total assets is worse than average for the industry. Data table Hoosier Auto Sales Income Statement Compared with Industry Average Year Ended December 31, 2018 Industry Hoosier Average Net sales $ 500,000 100.0 % 350,000 64.3% Cost of goods sold Gross profit 150,000 35.7 % 109,000 27.3% Operating expenses Operating income 41,000 8.4 % 3,000 1.1 % Other expenses $ 38,000 7.3% Net income Hoosier Auto Sales Balance Sheet Compared with Industry Average December 31, 2018 Industry Hoosier Average Current assets Fixed assets, net Intangible assets, net Other assets $ 245,000 77.2% 63,700 16.3 % 14,000 2.8% 27,300 3.7 % $ 350,000 100.0% Total assets Current liabilities 136,500 40.1 % Long-term liabilities 52,500 20.3% 161,000 39.6 % Stockholders' equity 350,000 100.0 % Total liabilities and stockholders' equity