Compare Gomez and Bajo by converting their income statements to common size. Gom

Question

Compare Gomez and Bajo by converting their income statements to common size.

                                                                                       Gomez                                                    Bajo

Net sales . . . . . . . . . . . . . . . . . . . . . . . .                    $10,300                                                       $17,650

Cost of goods sold . . . . . . . . . . . . . . . . .                    6,293                                                              12,708

Other expense . . . . . . . . . . . . . . . . . . . .                    3,410                                                              4,007

Net income . . . . . . . . . . . . . . . . . . . . . .                         $ 597    $ 935                                         

Which company earns more net income? Which company's net income is a higher percentage of its net sales?

Prepare the common-sized financial analysis:

Explanation / Answer

Prepare the common-sized financial analysis:

Bajo company earns more net income and Gomez company's net income is a higher percentage of its net sales

Normal income statement Common size financial statement Gomez Bajo % % Net sales 10300 17650 100% 100% Cost of goods sold 6293 12708 61.10% 72% Gross profit 4007 4942 38.90% 28% Other expenses 3410 4007 33.11% 22.70% Net income 597 935 5.79% 5.30%

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