Lab Insight: Financial statements are useful for comparing the performance of different companies, but sometimes the comparison is not appropriate. One company may be significantly larger than another and be performing worse but look like it is doing better. This problem can be alleviated by comparing companies based on their common size financial statements. A common size income statement shows all values as a percentage of total revenue or sales, while a common size balance sheet has all assets, liabilities, and stockholder$$s equity shown as a percentage of total assets. This allows stakeholders to compare companies based on the percentage of its business that is a certain statement line item, rather than by a dollar amount.

Required:

Prepare a common sized income statement and balance sheet to compare the companies based on percentages.

Ask the Question: How can we turn financial statements from an annual report or $10-$K into common$-$size financial statements?

Master the Data: Apply the same steps as Lab $12-2$ Excel to create common sized income statements and balance sheets for the companies listed in the file $$Alt Lab $12-2$ Excel.xlsx$.$

Software needed

Excel

Screen capture tool $($Windows: Snipping Tool; Mac: Cmd$+$Shift$+4)$

Data: Alt Lab $12-2$ Data.xlsx

Perform the Analysis: Refer to Lab $12-2$ Alternate in the text for instructions and Lab $12-2$ steps for each the of lab parts.

Note: Submit your answers for the following Analysis Questions in the text entry field below.

Why would Amazon have the largest inventory out of this group of companies?

Why doesn't Netflix have inventory?