McDonough Products, Inc.
Income Statement Compared with Industry Average
Year Ended December 31, 2010
						McDonough	Industry Average
Net sales...............................................................................						$ 700,000	100.0%
Cost of goods sold..............................................................						490,000	57.3
Gross profit..........................................................................						210,000	42.7
Operating expenses ...........................................................						175,000	29.4
Operating income................................................................						35,000	13.3
Other expenses....................................................................						7,000	2.5
Net income ..........................................................................						$ 28,000	10.8%
McDonough Products, Inc.
Balance Sheet Compared with Industry Average
December 31, 2010
						McDonough	Industry Average
Current assets......................................................................						$ 471,200	72.1%
Fixed assets, net .................................................................						114,700	19.0
Intangible assets, net ..........................................................						21,080	4.8
Other assets.........................................................................						13,020	4.1
Total .....................................................................................						620,000	100.0%
Current liabilities .................................................................						240,560	0.5
Long-term liabilities ............................................................						135,160	21.0
Stockholders equity............................................................						244,280	31.8
Total .....................................................................................						$ 620,000	100.0%
Industry Average Current Ratio					1.53
Industry Average Total Debt to Total Assets					0.68
Requirements
1.	Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Products common-size statement, and the second column should show the industry averages.
2.	For the profitability analysis, compute McDonough Products (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 McDonough Products profit performance better or worse than the average for the industry?
3.	For the analysis of financial position, compute McDonough Products (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Products financial position better or worse than the average for the industry?