A common-size income statement for Creek Enterprises? 2014 operations follows. U

Question

A common-size income statement for Creek Enterprises?

2014 operations follows. Using the firm?s 2015 income statement presented in

Problem 3?18, develop the 2015 common-size income statement and compare it with

the 2014 statement. Which areas require further analysis and investigation?

Creek Enterprises Common-Size Income Statement for the Year Ended December 31, 2014

Sales revenue ($35,000,000) 100.0%

Less: Cost of goods sold 65.9

Gross profits 34.1%

Less: Operating expenses

Selling expense 12.7%

General and administrative expenses 6.3

Lease expense 0.6

Depreciation expense 3.6

Total operating expense 23.2

Operating profits 10.9%

Less: Interest expense 1.5

Net profits before taxes 9.4%

Less: Taxes (rate 5 40%) 3.8

Net profits after taxes 5.6%

Less: Preferred stock dividends 0.1

Earnings available for common stockholders 5.5%

A common-size income statement for Creek Enterprises?? 2014 operations follows. Using the firm??s 2015 income statement presented in Problem 3??18, develop the 2015 common-size income statement and compare it with the 2014 statement. Which areas require further analysis and investigation? Creek Enterprises Common-Size Income Statement for the Year Ended December 31, 2014 Sales revenue ($35,000,000) 100.0% Less: Cost of goods sold 65.9 Gross profits 34.1% Less: Operating expenses Selling expense 12.7% General and administrative expenses 6.3 Lease expense 0.6 Depreciation expense 3.6 Total operating expense 23.2 Operating profits 10.9% Less: Interest expense 1.5 Net profits before taxes 9.4% Less: Taxes (rate 5 40%) 3.8 Net profits after taxes 5.6% Less: Preferred stock dividends 0.1 Earnings available for common stockholders 5.5% Common-size statement analysis

Explanation / Answer

common size statement for 2015:

The net profit after tax requires further incestigation as it has dropeed to 4% from 5.6% compared to previous year.

Gross profit has also came down from 34.1% to 30% in current year.

Particulars Dec 2015 Sales Revenue 100.0% Less Cost of good sold 70.0% Gross profit 30.0% Less operating expenses Selling exp 10.0% general and admin exp 6.0% lease exp 0.7% Depreciation exp 3.3% Total operating exp 20.0% Operating profit 10.0% less interest exp 3.3% Net profit before tax 6.7% Less tax rate 2.7% Net profit after taxes 4.0% less preferred stock dividend 0.3% Earning available for common stock holders 3.7%

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