Refer to Exhibit 6.3 Common-size Financial Statements in the textbook and review the common-size approach. Describe what "common-size" means and why it is used in financial analysis. Using a company from the approved list, perform common-size analysis on the balance sheets or income statements for at least two fiscal years. What does the information tell you How can you use that information to compare companies within the same industry to each other

List of approved companies: The Coca-Cola Co. (Ticker KO); PepsiCo (Ticker PEP); Home Depot (Ticker HD); Lowe's (Ticker LOW); Gap, Inc. (Ticker GPS)

EXHIBIT 6-3 Common-size Financial Statements 1 2 3 4 5 6 7 8 9 10 11 12 Balance sheet (year-end) 2.1% 20.0% 22.5% 37.9% 13.4% 11.7% 4.0% 30.8% 17.6% 19.9% 42.7% 14.1% Cash and marketable securities Receivables 7.5 4.8 18.0 17.8 12.5 26.0 4.2 78.8 13.6 9.0 25.7 8.9 Inventories 3.7 2.1 0.1 17.7 22.5 7.3 8.6 8.1 0.9 0.1 2.4 301.5 182.6 94.5 51.3 67.9 79.0 34.4 28.9 47.5 8.1 24.8 78.3 Property, plant, and equipment Accumulated depreciation (99.7) (49.0) (38.6) (16.3) (30.7) (46.4) (16.6) (15.6) (27.7) (2.7) (11.5) (25.4) Investments 7.0 - 15.2 8.8 8.5 28.8 3.2 2.6 7.5 8.8 1.3 5.2 Other assets 47.2 13.1 51.1 123.5 9.4 30.4 15.8 70.6 33.8 5.2 17.8 104.8 269.3% 173.6% 162.8% 235.5% 103.5% 136.8% 53.6% 192.1% 100.4% 47.2% 100.9% 186.3% Total assets Current liabilities Long-term debt 40.4% 32.8% 53.1% 50.4% 34.496 46.2% 26.4% 118.4% 33.8% 28.7% 34.3% 21.2% 78.3 28.0 39.8 13.9 14.4 28.2 13.4 30.3 12.4 1.0 0.1 73.4 Other noncurrent liabilities 81.0 5.5 7.8 41.3 13.8 8.7 2.4 16.5 8.0 4.3 5.4 24.8 71.6 109.3 62.1 129.9 40.9 53.7 11.4 28.9 48.4 13.2 81.1 88.9 269.3% 173.6162.8% 235.5% 103.5% 138.8% 53.6% 192.1% 100.4% 47.2% 100.9 186.3% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% - 0.7% 1.4% 4.3% - - - - Shareholders' equity Total liabilities and shareholders' equities Income statement Operating revenues Other revenues Cost of goods sold (excluding depreciation) or operating expenses Depreciation and amortization Selling and administrative Interest expense Research and development 58.7 75.4 74.4 11.1 86.5 73.8 74.9 98.3 45.1 80.9 31.6 33.1 11.4 8.6 7.8 9.7 4.3 5.6 2.9 3.2 4.7 0.7 2.8 21.2 15.9 16.2 - 32.2 11.3 16.2 38.0 8.7 25.1 31.0 4.6 1.3 1.1 0.7 1.4 0.1 0.7 2.5 1.3 - 0.1 7.9 14.4 4.2 1.6 0.9 13.6 Income taxes 2.5 2.7 2.2 5.1 1.7 3.7 1.2 4.1 2.8 2.8 10.1 2.8 Other (1.5) (7.0) 11.5 5.2 (1.8) (1.0) 1.8 0.6 0.8 (0.2) (0.7) (4.0) Total expenses 91.6% 95.2% 97.0% 78.496 92.1% 97.7% 97.7% 108.7% 92.396 93.896 82.8% 92.096 Net income 8.4% 4.8% 3.7% 21.8% 9.0% 6.6% 2.3% (8.7) 7.7% 6.2% 17.4% 8.09 25.2% 17.7% 7.996 31.1% 10.6% 13.3% 5.8% 7.1% 12.06 10.8% 24.3% 28.2% Cash flow from operations Free operating cash flow 10.6 (9.5) 5.9 25.6 5.5 4.7 3.1 4.8 7.6 9.7 23.1 18.5