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.
Sales $6,000 $64,000
Cost of goods sold 3,200 33,650
Gross margin $2,800 $30,350
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
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?
Using the Linden Corporation exercise as an example, this file contains detailed instructions for the creation and analysis of a common sized financial statement.