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Common Size Balance Sheet and Income Statement

Marva Rossen, who just two years ago was appointed president of Hedrick Company, admits that the company has been "inconsistent" in its performance over the past several years. But Rossen argues that the company has its costs under control and is now experiencing strong sales growth, as evidenced by the more than 22% increase in sales over the last year. Rossen also argues that investors have recognized the improving situation at Hedrick Company, as shown by the jump in the price of its common stock from $70 per share last year to $54 per share this year. Rossen believes that with strong leadership and with the modernized equipment that the $1,000,000 loan will enable the company to buy, profits will be even stronger in the future.

Anxious to impress your supervisor, you decide to generate all the information you can about the company. You determine that the following ratios are typical of companies in Hedrick's industry:

(Please see attached file.)

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A common size balance sheet presents all items as a percentage of total assets, total liabilities, and shareholders' equity. ...

Solution Summary

Solution contains a comparative balance sheet (common size) and comparative income statement (common size).