Ratios from Comparative and Common-Size Data

Consider the following financial statements for Waverly Company.

During 2016, management obtained additional bond financing to enlarge its production facilities. The company faced higher production costs during the year for such things as fuel, materials, and freight. Because of temporary government price controls, a planned price increase on products was delayed several months.

As a holder of both common and preferred stock, you decide to analyze the financial statements:

WAVERLY COMPANY

Balance Sheets

(Thousands of Dollars)Dec. 31, 2016Dec. 31, 2015AssetsCash and cash equivalents$19,000$12,000Accounts receivable (net)55,00043,000Inventory120,000105,000Prepaid expenses20,00014,000Plant and other assets (net)471,000411,000Total Assets$685,000$585,000Liabilities and Stockholders' EquityCurrent liabilities$91,000$82,00010% Bonds payable225,000160,0009% Preferred stock, $50 Par Value75,00075,000Common stock, $10 Par Value200,000200,000Retained earnings94,00068,000Total Liabilities and Stockholders' Equity$685,000$585,000WAVERLY COMPANY

Income Statements

(Thousands of Dollars)20162015Sales revenue$820,000$678,000Cost of goods sold545,000433,920Gross profit on sales275,000244,080Selling and administrative expenses175,000149,200Income before interest expense and income taxes100,00094,880Interest expense22,50016,000Income before income taxes77,50078,880Income tax expense22,90021,300Net income$54,600$57,580Other financial data (thousands of dollars)Cash provided by operating activities$65,200$60,500Preferred stock dividends6,7506,750b. Calculate common-size percentages for each year's income statement.

b. Round answers to one decimal place.

Common-Size Percentages20162015Sales revenueAnswer%Answer%Cost of goods soldAnswer%Answer%Gross profit on salesAnswer%Answer%Selling and administrative expensesAnswer%Answer%Income before interest expense and income taxesAnswer%Answer%Interest expenseAnswer%Answer%Income before income taxesAnswer%Answer%Income tax expenseAnswer%Answer%Net incomeAnswer%Answer%