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(Solution) - Ambrose Department Stores chief executive officer CEO has asked you

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Ambrose Department Stores' chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers.

1. Prepare a common-size income statement and balance sheet for Ambrose Department Stores. The first column of each statement should present Ambrose Department Stores' common-size statement, while the second column should present the industry averages.
2. For the profitability analysis, compute Ambrose Department Stores' (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 Ambrose Department Stores' profit performance better or worse than the average for the industry?
3. For the analysis of financial position, compute Ambrose Department Stores' (a) ratios of current assets to total assets and (b) ratio of stockholders' equity to total assets. Compare these ratios with the industry averages. Is Ambrose Department Stores' financial position better or worse than the industry averages?


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This question was answered on: Jul 11, 2017

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