Reference no: EM132802193

Problem - Top managers of Tilt Windows Inc., a specialty fabricating company, have asked for your help in comparing the company's profit performance and financial position and with the average for the window-making industry. The accountant has given you the industry company's income statement and balance sheet, and also the average data for their industry (amounts in millions):

TILT WINDOWS INC. Income Statement For the Year Ended December 31, 2020
	Tilt Windows	Industry Average
Net sales	$29.2	100.0%
Cost of goods sold	17.6	65.9
Gross margin	11.6	34.1
Operating expenses	8.4	28.1
Operating income	3.2	6.0
Other expenses	0.2	0.4
Net income	$3.0	5.6%

 

TILT WINDOWS INC. Balance Sheet December 31, 2020
	Tilt Windows	Industry Average
Current assets	$10.4	66.6%
Property, plant, equip., net	8.0	32.3
Other assets	0.2	1.1
Total assets	$18.6	100.0%
Current liabilities	$6.2	35.6%
Long-term liabilities	5.2	19.0
Shareholders' equity	7.2	45.4
Total liabilities and shareholders' equity	$18.6	100.0%

Required -

1. Prepare a two-column common-size income statement and a two-column common-size balance sheet for Tilt Windows Inc. The first column of each statement should present Tilt Windows Inc.'s common-size statement, and the second column should show the industry averages.

2. For the profitability analysis, compare Tilt Windows Inc.'s (a) ratio of gross margin to net sales, (b) ratio of operating income (loss) to net sales, and (c) ratio of net Inc income (loss) to net sales with the industry averages. Is Tilt Windows Inc.'s profit Inc performance better or worse than the average for the industry?

3. For the analysis of financial position, compare Tilt Windows Inc.'s (a) ratio of current assets to total assets and (b) ratio of shareholders' equity to total assets with the industry averages. Is Tilt Windows Inc.'s financial position better or worse than the average for the industry?