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Construct a common-size income statement. Check figure: NPAT for 2012 should be 4.0% Be sure to...


Construct a common-size income statement. Check figure: NPAT for 2012 should be 4.0% Be sure to indicate if each account is
P3-19 Common-size statement analysis A common-size income statement for Creek Enterprises 2011 operations follows. Using the


Creek Enterprises Income Statement for the Year Ended December 31, 2012 $30,000,000 21,000,000 $ 9,000,000 Sales revenue Less
Construct a common-size income statement. Check figure: NPAT for 2012 should be 4.0% Be sure to indicate if each account is "better" or "worse" compared to the previous year.
P3-19 Common-size statement analysis A common-size income statement for Creek Enterprises' 2011 operations follows. Using the firm's 2012 income statement pre- sented in Problem 3-18, develop the 2012 common-size income statement and com- pare it to the 2011 statement. Which areas require further analysis and investigation? Creek Enterprises Common-Size Income Statement for the Year Ended December 31, 2011 100.0% 65.9 34.1% Sales revenue ($35,000,000) Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders 12.7% 6.3 0.6 3.6 23.2 10.9% 1.5 9.4% 3.8 5.6% 0.1 5.5%
Creek Enterprises Income Statement for the Year Ended December 31, 2012 $30,000,000 21,000,000 $ 9,000,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes Less: Preferred stock dividends Earnings available for common stockholders $ 3,000,000 1,800,000 200,000 1,000,000 $ 6,000,000 $ 3,000,000 1,000,000 $ 2,000,000 800,000 $ 1,200,000 100,000 $ 1,100,000
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Answer #1
Creek Enterprises Common-size Income Statement
Particulars December 31, 2012 December 31, 2011 Indication
Sales revenue 100.0% 100.0% Worst
Less: Cost of goods sold 70.0 65.9 Worst
     Gross Profit 30.0% 34.1% Worst
Less: Operating Expenses
           Selling expense 10.0% 12.7% Better
           General and administrative expenses 6.0 6.3 Better
           Lease expense 0.7 0.6 Worst
           Depreciation Expense 3.3 3.6 Better
                 Total operating expense 20 23.2 Better
           Operating profits 10.0% 10.9% Worst
Less: Interest expense 3.3 1.5 Worst
           Net profits before taxes 6.7% 9.4% Worst
Less: Taxes (rate = 40%) 2.7 3.8 Better
           Net profits after taxes 4.0% 5.6% Worst
Less: Preferred stock dividends 0.1 0.1 Better
           Earnings available for common stockholders 3.9% 5.5% Worst

The areas indicating 'Worst' are to be analysed and especially to be investigated into Interest expense.

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