Otto's Auto Sales Income Statement Compared with Industry Average Year Ended December 31, 2018 Industry Otto's Average Net sales 955,100 100.0% 651,400 64.3 % Cost of goods sold Gross profit 35.7 % 303,700 217,800 27.3% Operating expenses Operating income 85,900 8.4 % 11,500 1.1 Other expenses $ 74,400 7.3 Net income Otto's Auto Sales Balance Sheet Compared with Industry Average December 31, 2018 Industry Otto's Average 77.2% Current assets $ 516,800 Fixed assets, net 112,300 16.3 Intangible assets, 2.8 % 23,100 3.7% 27,900 Other assets $ 680,100 100.0 Total assets 268,600 Current liabilities 40.1 Long-term liabilities 129,200 20.3 39.6 % 282,300 Stockholders' equity 100.0% $ 680,100 Total liabilities and stockholders' equity EA 1. Prepare a two-column, common-size income statement and a two-column common-size balance sheet for Otto's Auto Sales. The first column of each statement should present Otto's Auto Sales' common-size statement and the second column should show the industry averages. 2. For the profitability analysis, examine Otto's 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 Otto's's profit performance better or worse than the industry average? 3. For the analysis of financial position, examine Otto's 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 Otto's Auto Sales' financial position better or worse than the industry average? Start by preparing a common-size income statement for Otto's Auto Sales. Otto's Auto Sales Common-Size Income Statement Compared to Industry Average Year Ended December 31, 2018 Industry Otto's Average (%) (%) 100.0 % % Net sales 64.3 % % Cost of goods sold 35.7 % % Gross profit 27.3 % % Operating expenses 8.4 % % Operating income 1.1 o% % Other expenses 7.3 % Net income