ACCT 212 : Course Project 2

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ACCT 212 : Course Project 2
Learning Objectives : Preparing common-size statements; analyzing
profitability; making comparisons with the industry
P13-50A Top managers of O’Hare Products, Inc., have asked for your help incomparing the companyâ€™s profit performance and financial position with the average for the industry. The accountant has given you the companyâ€™s income statement and balance sheet and also the following data for the industry. The problem is that O’Hare is in dollars and the Industry Average is in percentages. To complete the analysis you will need to convert O’Hare’s dollar amounts to percentages.
O’Hare Products, Inc.
Income Statement Compared with Industry Average
Year Ended December 31, 2012
O’Hare Industry
Average
\$ 960,000 100.0%
662,400 57.3%
297,600 42.7%
220,800 29.4%
76,800 13.3%
9,600 2.5%
\$ 67,200 10.8%
O’Hare Products, Inc.
Balance Sheet Compared with Industry Average
December 31, 2012
O’Hare Industry
Average
\$ 292,000 72.1%
72,800 19.0%
14,000 4.8%
21,200 4.1%
400,000 100.0%
188,000 47.2%
84,000 21.0%
128,000 31.8%
\$ 400,000 100.0%
Requirements
Prepare a common-size income statement and balance sheet for Oâ€™Hare Products. The first column of each statement should present Oâ€™Hare Productsâ€™ common-size statement, and the second column should show the industry averages.
For the profitability analysis, compare Oâ€™Hare Productsâ€™ (a) ratio of gross profit to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales with the industry averages. Is Oâ€™Hare Productsâ€™ profit performance better or worse than the average for the industry?
For the analysis of financial position, compute Oâ€™Hare Productsâ€™ (a) ratios of current assets and current liabilities to total assets and (b) ratio of stockholdersâ€™ equity to total assets. Compare these ratios with the industry averages. Is Oâ€™Hare Productsâ€™ financial position better or worse than the average for the industry?

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ACCT 212 : Course Project 2

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 ACCT 212 : Course Project 2 Learning Objectives : Preparing common-size statements; analyzing profitability; making comparisons with the industry P13-50A Top managers of O’Hare Products, Inc., have asked for your help incomparing the companyâ€™s profit performance and financial position with the average for the industry. The accountant has given you the companyâ€™s income statement and balance sheet and also the following data for the industry. The problem is that O’Hare is in dollars and the Industry Average is in percentages. To complete the analysis you will need to convert O’Hare’s dollar amounts to percentages. O’Hare Products, Inc. Income Statement Compared with Industry Average Year Ended December 31, 2012 O’Hare Industry Average \$ 960,000 100.0% 662,400 57.3% 297,600 42.7% 220,800 29.4% 76,800 13.3% 9,600 2.5% \$ 67,200 10.8% O’Hare Products, Inc. Balance Sheet Compared with Industry Average December 31, 2012 O’Hare Industry Average \$ 292,000 72.1% 72,800 19.0% 14,000 4.8% 21,200 4.1% 400,000 100.0% 188,000 47.2% 84,000 21.0% 128,000 31.8% \$ 400,000 100.0% Requirements Prepare a common-size income statement and balance sheet for Oâ€™Hare Products. The first column of each statement should present Oâ€™Hare Productsâ€™ common-size statement, and the second column should show the industry averages. For the profitability analysis, compare Oâ€™Hare Productsâ€™ (a) ratio of gross profit to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales with the industry averages. Is Oâ€™Hare Productsâ€™ profit performance better or worse than the average for the industry? For the analysis of financial position, compute Oâ€™Hare Productsâ€™ (a) ratios of current assets and current liabilities to total assets and (b) ratio of stockholdersâ€™ equity to total assets. Compare these ratios with the industry averages. Is Oâ€™Hare Productsâ€™ financial position better or worse than the average for the industry?

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ACCT 212 – Course Project 2

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ACCT 212 : Course Project 2

Learning Objectives : Preparing commonÂ­size statements; analyzing profitability; making comparisons with the industry

Top managers of McDonough Products, Inc., have asked for your help in comparing the companyâ€™s profit performance and financial position with the average for the industry. The accountant has given you the companyâ€™s income statement and balance sheet and also the following data for the industry. The problem is that McDonough is in dollars and the Industry Average is in percentages. To complete the analysis you will need to convert McDonoughs dollar amounts to percentages.

McDonough Products, Inc.
Income Statement Compared with Industry Average
Year Ended December 31, 2010
McDonough
Net sales…………………………………………………………………….
Cost of goods sold……………………………………………………..
Gross profit………………………………………………………………..
Operating expenses …………………………………………………..
Operating income……………………………………………………….
Other expenses…………………………………………………………..
Net income ………………………………………………………………..

\$700,000
490,000
210,000
175,000
35,000
7,000
\$28,000

Industry
Average
100.0%
57.3
42.7
29.4
13.3
2.5
10.8%

McDonough Products, Inc.
Balance Sheet Compared with Industry Average
December 31, 2010
Industry
McDonough

Average

Current assets…………………………………………………………….
Fixed assets, net ………………………………………………………..
Intangible assets, net ………………………………………………….
Other assets……………………………………………………………….
Total ………………………………………………………………………….

\$471,200
114,700
21,080
13,020
620,000

72.1%
19.0
4.8
4.1
100.0%

Current liabilities ………………………………………………………..
LongÂ­term liabilities ……………………………………………………
Stockholdersâ€™ equity……………………………………………………
Total ………………………………………………………………………….

240,560
135,160
244,280
\$620,000

47.2%
21.0
31.8
100.0%

Industry Average Current Ratio

1.53

Industry Average Total Debt to Total Assets

0.68

See red triangle for helpful hints.

Requirements
1.Prepare a commonÂ­size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Productsâ€™ commonÂ­size statement, and the second column should show the industry averages.

2.For the profitability analysis, compute McDonough Productsâ€™ (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Productsâ€™ profit performance better or worse than the average for the industry?

3.For the analysis of financial position, compute McDonough Productsâ€™ (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Productsâ€™ financial position better or worse than the average for the industry?

Chapter 13: Financial Statement Analysis

Page 1 of 3

Requirement #1
McDonough Products, Inc.
Common-Size Income Statement Compared to Industry Average
Year Ended December 31, 2010
McDonough

Industry

Products

Average

Net salesâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦
Cost of goods soldâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Gross profitâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Operating expensesâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.
Operating incomeâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.
Other expensesâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.
Net incomeâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦

McDonough Products, Inc.
Common-Size Balance Sheet Compared to Industry Average
Year Ended December 31, 2010
McDonough
Current assetsâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Fixed assets, netâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Intangible assets, netâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦
Other assetsâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.
Total assetsâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Current liabilitiesâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.â€¦â€¦â€¦â€¦â€¦â€¦..
LongÂ­term liabilitiesâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦..
Stockholdersâ€™ equityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦â€¦.
Total liabilities and stockholdersâ€™ equityâ€¦â€¦â€¦â€¦â€¦â€¦â€¦

Requirement #2

Requirement #3

Industry

Products

Average

Criteria
Common Size Analysis: (50 pts

Excellent

Good

Poor

Very Poor

poss)

awarded

Completeness Â­ 25pts poss All requirements are
completed in
accordance with the

All requirements are

Most requirements are Many requirements completed and mostly completed that mostly are not completed follow the directions, follow the directions, and/or the directions directions, labeled and labeled and fairly organized well in organized in missing some labels nd only somewhat were generally not
followed, missing worksheet.organized.labels and unorganized.

25 pts
Accuracy Â­ 25pts poss

Points

All ratios are calculated with worksheet.22Â­24 pts

19Â­21 pts

0Â­18 pts

80% plus of ratios are 60Â­79% of ratios are Less than 60% of

calculated with ratios are calculated accurate results and accurate results and appropriate terms of mostly appropriate accurate results and some appropriate with accurate results and some appropriate expression.

terms of expression.

terms of expression.

25 pts

terms of expression.
22Â­24 pts

19Â­21 pts

0Â­18 pts

Profitability Ratios: (50 pts poss)
Completeness Â­ 25pts poss All requirements are
completed in

All requirements are Most requirements are Many requirements
completed and mostly completed that mostly are not completed

accordance with the follow the directions, follow the directions, and/or the directions
directions, labeled and labeled and fairly
missing some labels were generally not
organized well in
worksheet.

organized in
worksheet.

and only somewhat
organized.

followed, missing
labels and
unorganized.

25 pts
Accuracy Â­25 pts poss

All ratios are

22Â­24 pts

19Â­21 pts

0Â­18 pts

80% plus of ratios are 60Â­79% of ratios are Less than 60% of

calculated with
calculated with
accurate results and accurate results and

calculated with
accurate results and

ratios are calculated
with accurate results

appropriate terms of mostly appropriate
expression.
terms of expression.

some appropriate
terms of expression.

and some appropriate
terms of expression.

25 pts

22Â­24 pts

19Â­21 pts

0Â­18 pts

Analysis of Financial Position:(50
pts poss)
Completeness Â­ 25pts poss All requirements are
completed in
accordance with the

All requirements are

Most requirements are Many requirements

completed and mostly completed that mostly are not completed

directions, labeled and labeled and fairly
organized well in
organized in

missing some labels
and only somewhat

were generally not
followed, missing

worksheet.

organized.

labels and
unorganized.

25 pts
Accuracy Â­ 25 pts poss

All ratios are

worksheet.
22Â­24 pts

19Â­21 pts

0Â­18 pts

80% plus of ratios are 60Â­79% of ratios are Less than 60% of

calculated with
calculated with
accurate results and accurate results and

calculated with
accurate results and

ratios are calculated
with accurate results

appropriate terms of mostly appropriate

some appropriate

and some appropriate

expression.

terms of expression.

terms of expression.

25 pts

terms of expression.
22Â­24 pts

19Â­21 pts

0Â­18 pts
Total Points Earned
0
Out of 150 pts

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ACCT 212 : Course Project 2

\$21.00

Category:

Description

1.Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Productsâ€™ common-size statement, and the second column should show the industry averages.
2.For the profitability analysis, compute McDonough Productsâ€™ (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Productsâ€™ profit performance better or worse than the average for the industry?
3.For the analysis of financial position, compute McDonough Productsâ€™ (a) Current ratio and (b) Debt ratio. Compare these ratios with the industry averages. Is McDonough Productsâ€™ financial position better or worse than the average for the industry?

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