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F. Naz, Chartered Accountant
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# Top managers of McDonough Products, Inc., have asked for your

### Resolved Question:

Top managers of McDonough Products, Inc., have asked for your help in comparing the company’s profit performance and financial position with the average for the industry. The accountant has given you the company’s income statement and balance sheet and also the following data for the industry:

McDonough Products, Inc.
Income Statement Compared with Industry Average
Year Ended December 31, 2010
McDonough "Industry
Average"
Net sales............................................................................... \$700,000 100.0%
Cost of goods sold.............................................................. 490,000 57.3
Gross profit.......................................................................... 210,000 42.7
Operating expenses ........................................................... 175,000 29.4
Operating income................................................................ 35,000 13.3
Other expenses.................................................................... 7,000 2.5
Net income .......................................................................... \$28,000 10.8%

McDonough Products, Inc.
Balance Sheet Compared with Industry Average
December 31, 2010
McDonough "Industry
Average"
Current assets...................................................................... \$471,200 72.1%
Fixed assets, net ................................................................. 114,700 19.0
Intangible assets, net .......................................................... 21,080 4.8
Other assets......................................................................... 13,020 4.1
Total ..................................................................................... 620,000 1.0

Current liabilities ................................................................. 240,560 0.5
Long-term liabilities ............................................................ 135,160 21.0
Stockholders’ equity............................................................ 244,280 31.8
Total ..................................................................................... \$620,000 100.0%

Requirements
1. Prepare a common-size income statement and balance sheet for McDonough Products. The first column of each statement should present McDonough Products’ common-size statement, and the second column should show the industry averages.
2. For the profitability analysis, compute McDonough Products’ (a) ratio of gross profit to net sales (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is McDonough Products’ profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compute McDonough Products’ (a) ratios of current assets and current liabilities to total assets and (b) ratio of stockholders’ equity to total assets. Compare these ratios with the industry averages. Is McDonough Products’ financial position better or worse than the average for the industry?
Submitted: 3 years ago.
Category: Homework
Expert:  F. Naz replied 3 years ago.
Could you provide the industry averages and also mention your deadline. thanks.
Customer: replied 3 years ago.

I don't know where to find any industry averages, but will ask my instructor. Here is the excel file we were given to answer the questions I indicated above. I have until Sunday 12/4/11 at 9 PM PST to submit this. I will email you once I hear back from my instructor.

Thank you, Phoebe

Customer: replied 3 years ago.

Actually I think you have the industry standard in the numbers above. Here is a JPG of the problem so maybe you can see what I get (since I can't send you an excel file).

Expert:  F. Naz replied 3 years ago.
Okay , I will go through all data and will come to you, please keep in touch with me, thanks.
Expert:  F. Naz replied 3 years ago.
Expert:  F. Naz replied 3 years ago.

Customer: replied 3 years ago.
I do not see an answer to my questions from yesterday here, but was told they were answered. Am I missing something? Why can't I view your response?
Expert:  F. Naz replied 3 years ago.

You need to spend \$3 to view this post. Add Funds to your account and buy credits.
F. Naz, Chartered Accountant
Category: Homework
Satisfied Customers: 4244
Experience: Experience with chartered accountancy

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