Textbook Problem

Preparing Common Size Statements

The financial statements for Richardson Socks company follow.

Required:

1. Prepare common size income statement to be used for horizontal analysis for Rechardson for 2017 and 2019 (in percentage terms, rounded to two decimal places ). Utilizes 2017 as the base year for both 2018 and 2019 . You do not to include the actual dollar amounts shown above.
2. Indicate why Richordson’s net income interested between 2017 and 2019.
3. Prepare common size balance sheet to be used for vertical analysis for 2019 and 2018 (in percentage term , rounded to two decimal places ). You do need to include actual dollar amount shown above.
4. Determine wether the proportionate of dollar invested in the various categories of assets has changed significantly between 2018 and 2019 .
5. Determine wether the proportionate of capital raised from the various liabilities categories and common stackholder’s equity has changed significantly between 2018 and 2019 .