Top managers of McDonough 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 McDonough Products.
The first column of each statement should present McDonough Products common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compute McDonough Products (a) Ratio of gross profit to net sales (b) Ratio of operating income to net sales(c) Ratio of net income to net sales.
Compare these figures with the industry averages. Is McDonough Products profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compute McDonough Products (a) Ratios of current assets and current liabilities to total assets (b) Ratio of stockholders equity to total assets.
Compare these ratios with the industry averages. Is McDonough Products financial position better or worse than the average for theindustry?

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McDonough Products, Inc Income Statement Compared with Industry Average Year Ended December 31, 2010 Industry McDonough Average $700,000 100.0% Net sales Cost of goods sold...490,000 57.3 Gross profit210,000 42.7 Operating expenses Operating incom35,000 13.3 Other expenses 175,000 29.4 7,000 528,000 10.8% 2.5 McDonough Products, Inc. Balance Sheet Compared with Industry Average December 31, 2010 Industry McDonough Average , $471,200 72.1% 114,700 19.0 21,080 4.8 Fixed assets, ne Intangible assets, net.. Other assets Total. 13,020 $620,000 4.1 100.0% Current liabilities $240,560 47.2% Long-term liahilites.13,160 21.0 Stockholders' equity... Total. , $620,000 100.0%