QUESTION #3

P14-35A Comprehensive analysis (Learning Objectives 2, 3, &4) Block Department Stores' chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers. Block Department Stores,Inc ncome Statement Compared with Industry Average For the Year Ended December 31 amounts in thousands Block Industry Average 6 Sales revenues 100.0% Less: Cast of goods sol 8 Gross 9 Less 10 Operating income 11 Less: Interest expense 12 Income before income taxes 13 Less Income tax expense 14 Net income 286 65 7% 19.5% 0.5% 0.3% 64,220 91,494 5,083 Block Department Stores, Inc. Balance Sheet Compared with Industry Average As of December 31 amounts in thousands Block Industry Average Assets 709% 237% 0% Current assets 312,3 117,760 5,980 3,920 Fixed assets, net Intangible assets, net 10 Other assets 11 Total assets 12 13 Liabilities 483% 15 Long-term iabilities 16Tllabilities 104,880 17 Stockholders' equity 19 Total common stockholders equity 141,680 35096 20 21 Total liabilities and equity Requirements Prepare a common-size income statement and balance sheet for Block Depart- ment Stores. The first column of each statement should present Block Department Stores' common-size statement, while the second column should present the industry averages 1. 2. For the profitability analysis, compute Block Department Stores' (a) ratio of gross profit to sales, (b) ratio of operating income to sales, and (c) ratio of net income to sales. Compare these figures with the industry averages. Is Block Department Stores profit performance better or worse than the industry average? 3. For the analysis of financial position, compute Block Department Stores' (a) ratio of current assets to total assets and (b) ratio of stockholders' equity to total assets. Com- pare these ratios with the industry averages. Is Block Department Stores' financial position better or worse than the industry averages