Love Bug Used 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 Proprietor has givenyou the company's income statement and balance sheet as welll as the industry average data for retailers of used autos.

LOVE BUG USED AUTO SALES

Income Statement Compared with Industry Average

Year Ended December 31, 2009

	Love Bug	Industry Average
Net sales	$521,000	100.0%
Cost of Goods Sold	331,000	62.1%
Gross profit	190,000	37.9%
Operating Expenses	109,000	27.8%
Operating Income	81,000	10.1%
Other expenses	3,000	0.4%
Net Income	$78,000	9.7%

LOVE BUG USED AUTO SALES

Balance Sheet Compared with Industry Average

December 31,2009

	Love Bug	Industry Average
Current Assets	$230,000	70.9%
Plant assets, net	49,000	23.6%
Intangible assets, net	3,000	0.8%
Other assets	15,000	4.7%
Total assets	$297,000	100.0%
Current Liabilities	$136,000	48.1%
Long-term liabilities	41,000	16.6%
Stockholders' equity	120,000	35.3%
Total liabilities and Stockholders' Equity	$297,000	100.0%

Requirements

1. Prepare a two-column, common-size income statement and a two column common-size balance sheet for Love Bug Used Auto Sales. The first column of each statement should present Love Bug's common-size statement and the second column should show the industry averages.

2. For the profitability analysis, examine Love Bug's (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 Love Bug's profit performance better or worse than the industry average?

3. For the analysis of financial position examine Love Bug's (a) ratio of current assets to total assets, (b) ratio of stockholders' equity to total assets. Compare these ratios with the industry averages. Is Love Bug's financial position better or worse than the industry average?