Consider the data for Roost Department Stores presented in Problem P17-28A.
In Problem P17-28A
The Roost Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages 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 Roost. The first column of each statement should present Roost’s common-size statement, and the second column, the industry averages.
2. For the profitability analysis, compute Roost’s (a) gross profit percentage and (b) profit margin ratio. Compare these figures with the industry averages. Is Roost’s profit performance better or worse than the industry average?
3. For the analysis of financial position, compute Roost’s (a) current ratio and (b) debt to equity ratio. Compare these ratios with the industry averages. Assume the current ratio industry average is 1.47, and the debt to equity industry average is 1.83. Is Roost’s financial position better or worse than the industry averages?