common-size financial statements

COMMON-SIZE FINANCIAL STATEMENTS

Problem 16-15

PROBLEMRefer to the financial statement data for Lyndex

Company in Problem 16-14.

REQUIREMENTS1. Present the balance sheet in common-size format.2. Present the income statement in common-size

format down through net income.3. Comment on the results of your analysis.

Requirement #1

Present the balance sheet in common-size format.

Lyndex CompanyCommon-Size Comparative Balance Sheet

Common-size percentages

This year Last year This year Last year

ASSETS

Current assets:

Cash 960, 000 1,260,000 5.61 % 8.47 %

Marketable securities 0 300,000 0 % 2.02 %

Accounts receivable, net 2,700,000 1,800,000 15.79 % 12.10 %

Inventory 3,900,000 2,400,000 22.81% 16. 13 %

Prepaid Expenses 240,000 180,000 1.40 % 1.21 %

Total current assets 7,800,000 5,940,000 45.61 % 39.92 %

Plant and equipment, net 9,300,000 8,940,000 54.39 % 60.08 %

Total Assets 17,100,000 14,880,000 100 % 100 %

=Cash/Total Assets

Liabilities and Stockholder’s Equity

Common-size percentages

This year Last year This year Last year

Liabilities:

Current liabilities 3,900,000 2,760,000 22.81 % 18.55 %

Note payable, 10 % 3,600,000 3,000,000 21.05 % 20.16 %

Total Liabilities 7,500,000 5,760,000 43.86 % 38.71 %

Stockholder’s equity:

Preferred Stock, 8 %, P30 par value 1,800,000 1,800,000 10.53 % 12.10 % Common stock, 80 par value 6,000,000 6,000,000 35. 09 % 40.32 % Retained Earnings 1,800,000 1,320,000 10. 53 % 8.87 %

Total stockholder’s equity 9,600,000 9,120,000 56. 14 % 61.29 %

Total liabilities and stockholder’s equity 17,100,000 14,880,000 100 % 100 %

=Current Liabilities/

Total Liabilities and

SHE

=Preferred Stock/ Total

Liabilities and SHE

Requirement #2

Present the income statement in common-size format down through net income.

Lyndex CompanyCommon-Size Comparative Income Statement and

ReconciliationCommon-size percentages

This year Last year This year Last year

Sales (all account) 15,750,000 12,480,000 100 % 100 %

Cost of goods sold 12,600,000 9,900,000 80 % 79.33 %

Gross margin 3,150,000 2,580,000 20 % 20.67 %

Selling and administrative expenses 1,590,000 1,560,000 10.10 % 12.50 %Net operating income 1,560,000 1,020,000 9.90 % 8.17 %

Interest expense 360,000 300,000 2.29 % 2.40 %

Net income before taxes 1,200,000 720,000 7.62 % 5.77 %

Income taxes (30%) 360,000 216,000 2.29 % 1.73 %

Net income 840,000 504,000 5.33 % 4.04 %

Requirement #3

Comment on the results of your analysis.

CASH

Cash decreases this year. We think that it has got to do with the statement of cash flow wherein the entity generates more cash outflow than

inflow.

ACCOUNTS RECEIVABLE

The entity maybe didn’t collect cash from the services renders on credit, or perhaps, sale on

accounts were increased.

INVENTORY

The entity maybe had produced more inventories, or there were still inventories not

sold.

PREPAID EXPENSES

The entity, perhaps, made an additional advanced payment either on rent or

insurance.

PROPERTY, PLANT AND EQUIPMENT

The entity improved the facilities, and added new equipments for a better system.

CURRENT LIABILITIES

The entity purchased more on account.

NOTE PAYABLE

The entity borrowed again from the bank.

SALES

The entity sold the inventories on account, since there were many inventories produced.