ACCT212 Top Managers OHare Products

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ACCT212 Top Managers OHare Products
Top managers of O’Hare Products, Inc., have asked for your help in comparing the company’s…

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ACCT212 Top Managers OHare Products

ACCT212 Top Managers OHare Products

A+ Course Project Week 7

ACCT 212 Course Project 2Top Managers of OHare Products
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 in comparing the company’s profit performance and financial position with the average for the industry. The accountant has given you the company’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.

 

 

Requirement 1
1.Prepare a common-size income statement and balance sheet for O’Hare Products. The first column of each statement should present O’Hare Products’ common-size statement, and the second column should show the industry averages.
2.For the profitability analysis, compare O’Hare Products’ (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 O’Hare Products’ profit performance better or worse than the average for the industry?
3.For the analysis of financial position, compute O’Hare Products’ (a) ratios of current assets and current liabilities to total assets and (b) ratio of stockholders’ equity to total assets. Compare these ratios with the industry averages. Is O’Hare Products’ financial position better or worse than the average for the industry?

 

Requirement #2
Profitability analysis:

Requirement #3

Ratios

O’Hare Products, Inc.
Common-Size Income Statement Compared to Industry Average
Year Ended December 31, 2012
O’Hare ProductsIndustry Average
Net sales……………………………………………………100.0%   100.0%
Cost of goods sold………………………………………..69.0%       57.3
Gross profit…………………………….…………………..31.0%       42.7

ACCT 212 Top Managers OHare Products

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