Prepare common-size balance sheets, income statements, and statements of cash flows for your chosen...

Question

Prepare common-size balance sheets, income statements, and statements of cash flows for your chosen company for the latest 2 years. Identify one company that competes with your chosen company, obtain their financial statements for the most recent two years, and prepare common-size balance sheets, income statements, and statements of cash flows for your chosen company for the latest 2 years.Explain why common-sized financial statements are a convenient way to compare financial statement items within the same period, between periods, and between competing companies.Perform a vertical analysis of at least one item on the common-size balance sheet, income statement, and statement of cash flows you prepared for the most recent year. Compare each item to the same item on the common-size financial statements for the previous period and to the same item on the common-size financial statements you prepared for the competing company.Discuss what this comparison tells you about your chosen company’s current financial condition, how it compares to the previous year, and how it compares with the financial condition of your chosen company’s competitor.

Neenisha · Accepted Answer

Analysis
We have chosen IBM as the competitor of Adobe Inc.
Common Size Financial Statements
In Common Size Financial Statements, we represent any figure in the statement as a percentage of other. For instance, in balance sheet all the assets are represented as a percentage of total assets and same goes for liabilities. This helps to understand the proportion of any asset with respect to total assets. Similarly in income statement we represent every figure as a percentage of revenue which helps us in understanding the proportion of cost and income with respect to revenue.

Prepare common-size balance sheets, income statements, and statements of cash flows for your chosen company for the latest 2 years. Identify one company that competes with your chosen company, obtain...

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