# ACCT212 Course Project 2

ACCT 212 : Course Project 2 “Learning Objectives : Preparing common-size statements; analyzingprofitability; making comparisons with the industry” P13-50A Top managers of O’Hare 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 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 “IndustryAverage”Net sales……………………………………………………………………. \$960,000 100.0%Cost of goods sold…………………………………………………….. 662,400 57.3%Gross profit……………………………………………………………….. 297,600 42.7%Operating expenses ………………………………………………….. 220,800 29.4%Operating income………………………………………………………. 76,800 13.3%Other expenses………………………………………………………….. 9,600 2.5%Net income ……………………………………………………………….. \$67,200 10.8%O’Hare Products, Inc. Balance Sheet Compared with Industry Average December 31, 2012 O’Hare “IndustryAverage”Current assets……………………………………………………………. \$292,000 72.1%Fixed assets, net ……………………………………………………….. 72,800 19.0%Intangible assets, net …………………………………………………. 14,000 4.8%Other assets………………………………………………………………. 21,200 4.1%Total …………………………………………………………………………. 400,000 100.0%Current liabilities ……………………………………………………….. 188,000 47.2%Long-term liabilities …………………………………………………… 84,000 21.0%Stockholdersâ equity…………………………………………………… 128,000 31.8%Total …………………………………………………………………………. \$400,000 100.0%See red triangle for helpful hints. Requirements 1. 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. 2. 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? 3. 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?

# ACCT212 Course Project 2

ACCT 212 : Course Project 2 “Learning Objectives : Preparing common-size statements; analyzingprofitability; making comparisons with the industry” P13-50A Top managers of O’Hare 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 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 “IndustryAverage”Net sales……………………………………………………………………. \$960,000 100.0%Cost of goods sold…………………………………………………….. 662,400 57.3%Gross profit……………………………………………………………….. 297,600 42.7%Operating expenses ………………………………………………….. 220,800 29.4%Operating income………………………………………………………. 76,800 13.3%Other expenses………………………………………………………….. 9,600 2.5%Net income ……………………………………………………………….. \$67,200 10.8%O’Hare Products, Inc. Balance Sheet Compared with Industry Average December 31, 2012 O’Hare “IndustryAverage”Current assets……………………………………………………………. \$292,000 72.1%Fixed assets, net ……………………………………………………….. 72,800 19.0%Intangible assets, net …………………………………………………. 14,000 4.8%Other assets………………………………………………………………. 21,200 4.1%Total …………………………………………………………………………. 400,000 100.0%Current liabilities ……………………………………………………….. 188,000 47.2%Long-term liabilities …………………………………………………… 84,000 21.0%Stockholdersâ equity…………………………………………………… 128,000 31.8%Total …………………………………………………………………………. \$400,000 100.0%See red triangle for helpful hints. Requirements 1. 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. 2. 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? 3. 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?