As the newest hire to the financial analysis group at Patterson Printing Company, you have been…

As the newest hire to the financial analysis group at Patterson Printing Company, you have been asked to perform a basis financial analysis of the company’s most recent financial statements. The 2016 balance sheet and income statement for the Patterson are as follows:

Patterson Printing Company

Balance Sheet, December, 31, 2016

Cash and marketable securities ……………………………….. $ 500

Accounts receivable …………………………………………… 6,000

Inventory ……………………………………………………… 9,500

Total current assets ……………………………………………. $16,000

Net property, plant, and equipment …………………………… 17,000

Total assets ……………………………………………………. $33,000

Accounts payable ……………………………………………… $ 7,200

Short-term debt ……………………………………………….. 6,800

Total current liabilities ……………………………………….. $14,000

Long-term liabilities ………………………………………….. 7,000

Total liabilities ………………………………………………… $21,000

Total common stockholders’ equity …………………………… 12,000

Total liabilities and stockholders’ equity ………………………. $33,000

Patterson Printing Company

Income Statement for the Year Ended December 31, 2016

Revenues ……………………………………………………. $30,000

Cost of goods sold ………………………………………….. (20,000)

Gross profit …………………………………………………. $10,000

Operating expenses …………………………………………. (8,000)

Net operating income ……………………………………….. $ 2,000

Interest expense …………………………………………….. (900)

Earnings before taxes ……………………………………….. $ 1,100

Income taxes ………………………………………………… (400)

Net income ………………………………………………….. $ 700

a. After discussing your training assignment with a fellow analyst who was hired last year, you learn that the first step in your completing the assignment is to prepare a common-size balance sheet for Patterson.

b. The second step is to prepare a common-size income statement for the firm.

As the newest hire to the financial analysis group at

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