Acc280 Financial Accounting: P14-23A The Russell Department Stores, Inc. chief executive officer

Financial Accounting

P14-23A Common size statements, analysis of profitability and financial position and comparison with the industry
The Russell Department Stores, Inc. chief executive officer has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet as well as the industry average data for retailers.
Russell Department Stores Inc.
Income Statement compared with Industry Average
Year ended December 31, 2010
Russell Industry Average
Net Sales$777,000100.0%
Cost of goods sold 523,69865.8
Gross Profit 253,30234.2
Operating expenses 162,39319.7
Operating income 90,90914.5
Other expenses 7,7700.4
Net Income$83,13914.1%
Russell Department Stores Inc.
Balance Sheet compared with Industry Average
December 31, 2010

Russell Industry
Average Current Assets$3330,75070.9%
Fixed Assets, net 1 23,48023.6
Intangible assets, net 9,8000.8
Other assets 25,9704.7
Total assets$490,000100.0%
Current liabilities$227,36048.1%
Long term liabilities 111,72016.6
Stockholders equity 150,92035.3
Total Liabilities $490,000100.0%

Requirements:
1. Prepare a common-size income statement and balance sheet for Russell. The first column of each statement should present Russell's common-size statement and the second column, the industry averages.
2. For the profitability analysis, compute Russell's (a) ration of gross profit to net sales, (b0 ration of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is Russell's profit performance better or worse than the industry average?
3. For the analysis of financial position, compute Russell's (a) ration of current assets to total assets and (b)ratio of stockholders equity to total assets. Compare these ratios with the industry averages. Is Russell's financial position better or worse than the industry averages?
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