Chapter 15, Problem 15.5SE

Requirement 1:

To determine

Common-size Statement

Common-size statement shows the relationship among various items of the financial statement with a base amount. It reveals the complete picture of business. It is otherwise called as vertical analysis.

Formula: $\text{Vertical analysis percentage }=\left(\frac{\text{Specific item}}{\text{Base}\text{amount}}\right)\times 100$

To prepare: Common-size statement

Requirement 2:

To determine

To find out: The company that earns more net income.

Requirement 3:

To determine

To find out: the company’s net income is a higher percentage of its net sales.