Vertical common-size income statements

(1) Prepare vertical common-size income statements and balance sheets for both companies.
Note: Use “Total Sales” and “Total Assets” as the denominators for income statement
and balance sheet, respectively. Compute for 2019, 2018, and 2017.
(2) Prepare horizontal analysis on income statements and balance sheets for both companies
for 2019 and 2018.
(3) Prepare ratio analyses (for 2019, 2018, and 2017) for both companies. You should
include the following ratios in your computations:
• Profitability ratios
o Gross Profit margin
o Profit margin
o Return on assets
o Return on equity
• Productivity
o Inventory Turnover
o Accounts Receivable Turnover
o PPE Turnover
o Asset Turnover
• Solvency
o Debt-to-equity
o Times interest earned
o Return on Financial leverage
• Liquidity
o Current Ratio
o Quick Ratio
o Operating cash flow to current liabilities
o Working capital
(3) Comment on the analytical results of the two companies based on your work in excel.
In addition to contrasting the ratios between the companies, you should interpret the
numbers and make suggestions as to why the ratio of one company might be higher/lower
than the other.