Financial & Managerial Accounting 3rd Edition by Charles Horngren,Harrison, Walter,Suzanne Oliver

Exercise 26

Common-size statements, analysis of profitability and financial position, comparison with the industry, and using ratios to evaluate a company
Consider the data for McConnell Department Stores presented in P15-23A.
Requirements
1. Prepare a common-size income statement and balance sheet for McConnell. The first column of each statement should present McConnell's common-size statement, and the second column, the industry averages.
2. For the profitability analysis, compute McConnell's (a) gross profit percentage and (b) rate of return on net sales. Compare these figures with the industry averages. Is McConnell's profit performance better or worse than the industry average
3. For the analysis of financial position, compute McConnell's (a) current ratio and (b) debt to equity ratio. Compare these ratios with the industry averages. Is McConnell's financial position better or worse than the industry averages