Prepare a common-sized income statement

Reference no: EM131815624

Question: Comparing Income Statements and Balance Sheets of Competitors

Following are selected income statement and balance sheet data from two European grocery chain companies: Tesco PLC (UK) and Ahold (The Netherlands)

Required: a. Prepare a common-sized income statement. To do this, express each income statement amount as a percent of sales. Comment on any differences observed between the two companies. Ahold's gross pro?t percentage of sales is considerably higher than Tesco's. What might explain this difference?

b. Prepare a common-sized balance sheet. To do this, express each balance sheet amount as a percent of total assets. Comment on any differences observed between the two companies.

c. Ahold has chosen to structure itself with a higher proportion of equity (and a lower proportion of debt) than Tesco. How does this capital structure decision affect your assessment of the relative riskiness of these two companies?

Reference no: EM131815624

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