Assignment 2 Questions
Problem 6.7 Common Size Financial Statements
The balance sheet and income statement for Webb Enterprises Inc. are found below:
Cash and Marketable Securities
Net property plant & equipment
Short –term debt
Total owner’s equity
Total liabilities and owners’ equity
Cost of goods sold
Net operating expenses
Earnings before taxes
A .Prepare a common size balance sheet for Webb Ent
B. Prepare a common size income statement for Webb Ent
C. Use your common size financial statements to respond to your boss’ request that you write up your assessment of the firm’s financial condition. Specifically, write up a brief narrative that responds to the following questions:
a. How much cash does Webb have on hand relative to its total assets?
b. What proportion of Webb’s assets has the firm financed using short term debt?
c. What percent of Webb’s revenues does the firm have left over after paying all of its expenses (including taxes)?
d. Describe the relative importance of Webb’s major expense categories, including cost of goods sold, operating expenses, and interest expenses.