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Common Sized Financial Statement Creation

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Common Sized Financial Statements

Linden Corporation has a 10% market share in its industry. Below are income statements ($millions) for Linden and for the industry.

Normal
Income Statement

Linden Industry

Sales $6,000 $64,000
Cost of goods sold 3,200 33,650
Gross margin $2,800 $30,350
Expenses
Sales and marketing $430 $3,850
Engineering 225 2,650
Finance and administration 650 4,560
Total expenses $1,305 $11,060

EBIT $1,495 $19,290
Interest expense 230 4,500
EBT $1,265 $14,790
Tax 500 5,620
Net income $765 $9,170

Required:

A. Develop common size income statements for Linden and the industry as a whole.
B. What areas should management focus on to improve performance, and what kind of issues should be examined or looked at in each area?

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Solution Summary

Using the Linden Corporation exercise as an example, this file contains detailed instructions for the creation and analysis of a common sized financial statement.

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