J: Compare comman-size income statements of two companies) Craft, Inc.. and Klee
ID: 2589973 • Letter: J
Question
J: Compare comman-size income statements of two companies) Craft, Inc.. and Kleen Corporation are competitors. Compare the two companies by converting their condensed income statements to common size. In millions) Craft Kleen Net sales $17800 $7.569 Cost of goods sold 10,573 4,965 Selling and administrative expenses 4,895 1,521 Interest expense 53 23 Other expenses 89 38 Income tax expense Net income S 1,460 S 772 Which company earned more net income? Which company's net income was a higher percentage of its net sales? Explain your answer.Explanation / Answer
In common size income statement, every item in the income statement is presented as a percentage of total sales.
Craft
Common size (Craft)
Kleen
Common size (Kleen)
Net sales
17800.00
100.00%
7569.00
100.00%
COGS
10573.00
59.40%
4965.00
65.60%
S & A Exp
4895.00
27.50%
1521.0
20.10%
Interest Exp
52.00
0.29%
23.0
0.30%
Other Exp
89.00
0.50%
38.0000
0.50%
Incom tax Exp
730.00
4.10%
250.00
3.30%
Net Income
1460.00
8.20%
772
10.20%
Craft earn more net income.
However Kleen net income is higher in terms of percentage of sales, because the sale of Kleen has less selling and admin Exp and income taxes than Craft.
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Hope this answer your query.
Feel free to comment if you need further assistance. J
Craft
Common size (Craft)
Kleen
Common size (Kleen)
Net sales
17800.00
100.00%
7569.00
100.00%
COGS
10573.00
59.40%
4965.00
65.60%
S & A Exp
4895.00
27.50%
1521.0
20.10%
Interest Exp
52.00
0.29%
23.0
0.30%
Other Exp
89.00
0.50%
38.0000
0.50%
Incom tax Exp
730.00
4.10%
250.00
3.30%
Net Income
1460.00
8.20%
772
10.20%
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