Top managers of Gilligan Products, Inc., have asked for your help in comparing the company€™s profit performance and financial position with the average for the industry. The accountant has given you the company€™s income statement and balance sheet and also the following data for the industry:

Requirements
1. Prepare a common-size income statement and balance sheet for Gilligan Products. The first column of each statement should present Gilligan Products€™ common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compare Gilligan 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 with the industry averages. Is Gilligan Products€™ profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compare Gilligan Products€™ (a) ratios of current assets and current liabilities to total assets and (b) ratio of stockholders€™ equity to total assets with the industry averages. Is Gilligan Products€™ financial position better or worse than the average for theindustry?

Transcribed Image Text:

Gilligan Products, Inc. Income Statement Compared with Industry Average Year Ended December 31, 2012 GilliganIndustry Average Net sales Cost of goods sold Gross profit Operating expenses Operating income Other expenses Net income $800,000 552,000 248,000 184,000 64,000 4,000 S 60,000 100.0% 57.3 42.7 29.4 13.3 2.5 10.8% Gilligan Products, Inc. Balance Sheet Compared with Industry Average December 31, 2012 GilliganIndustry Average Current assets Fixed assets, net Intangible assets, net Other assets Total $377,600 113,920 19,200 129,280 $640.000 72.1% 19.0 4.8 100.000 Current liabilities Long-term liabilities Stockholders' equity Total $300,800 134,400 204,800 $640,000 47.2% 21.0 31.8