Need accounting help with A common-size income statement

Dec 15th, 2015
Business Finance
Price: $25 USD

Question description

Apple a Day, Inc. and Health Edibles, Inc. are food catering businesses that operate in the same metropolitan area. Their customers include Fortune 500 companies, regional firms, and individuals. The two firms reported similar profit margins for the current year. Also, both firms base bonuses for managers on the achievement of a target profit margin and return on equity. Each firm has submitted a loan request to you, a loan officer for City National Bank. They have provided you with the following information:

Apple a Day

Healthy Edibles

Net Sales



Cost of goods sold



Gross margin



Operating expenses



Operating income



Gain on sale of real estate



Interest expense



Income before income taxes



Income tax expense



Net income



Average stockholders' equity



Write a paper that completes the following tasks:

  1. Perform a vertical analysis and prepare a common-size income statement for each firm. Compute profit margin and return on equity. (Round your answers to one decimal place.)
  2. Discuss these results, the bonus plan for management, and loan considerations. Identify the company that is a better loan risk and explain why.

Your paper should meet the following requirements:

  • Be 3-5 pages in length, not counting the required title and reference pages. Your paper should include an introduction, a body with at least two fully developed paragraphs, and a conclusion.
  • APA style.

Textbook (Managerial Accounting 13 edition, Warren, Reeve, Duchac).

Tutor Answer

(Top Tutor) unicew
School: Cornell University

Studypool has helped 1,244,100 students

Review from student
" Thanks, good work "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1821 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors