TheGoldenFence Company andStoneWall Corporation are competitors in manufacturing walls and fences. You are interested in comparing the two firms' profitability. Their income statements and other information are presented below.LOADING...(Clickthe icon to view the comparative income statements.)GoldenFence is the larger company based on sales and total assets, so you perform the following steps to compare and analyze the companies. Read therequirementsLOADING.... Requirement a. Prepare common-size income statements. Comment on differences in the relative size of each line item. (Round percentages to the nearest tenth of a percent, X.X%.) Percent of Sales Golden FenceStone WallGolden FenceStone Wall(amounts in millions)CompanyCorporationCompanyCorporationSales$987,236$67,450 % %Cost of goods sold678,62643,370 % %Gross profit308,61024,080 % %Selling, general, and administrative expenses58,6362,408 % %Other operating expenses12,344722 % %Interest expense24,689193

Answered: The Golden Fence Company and Stone Wall…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The

Golden

Fence Company and

Stone

Wall Corporation are competitors in manufacturing walls and fences. You are interested in comparing the two firms' profitability. Their income statements and other information are presented below.

(Click

the icon to view the comparative income statements.)

Golden

Fence is the larger company based on sales and total assets, so you perform the following steps to compare and analyze the companies.

Read the

requirements

Requirement a. Prepare common-size income statements. Comment on differences in the relative size of each line item. (Round percentages to the nearest tenth of a percent, X.X%.)

			Percent of Sales
	Golden Fence	Stone Wall	Golden Fence	Stone Wall
(amounts in millions)	Company	Corporation	Company	Corporation
Sales	$987,236	$67,450		%	%
Cost of goods sold	678,626	43,370		%	%
Gross profit	308,610	24,080		%	%
Selling, general, and administrative expenses	58,636	2,408		%	%
Other operating expenses	12,344	722		%	%
Interest expense	24,689	193

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Profitability ratios

Profitability ratios are the ratios that are calculated to know the different profits as a percentage of different variables.

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