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Common Sized Financial Statement Creation

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?

Attachments

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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