Question 1 Ivanhoe Burgers operates and franchises fast-food restaurants special

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Question 1 Ivanhoe Burgers operates and franchises fast-food restaurants specializing in grilled hamburgers and chicken sandwiches. The 2015 and 2016 income statements are as follows (in $000s) Year Ended December 31, 2016 December 31, 2015 Total revenues $41,051 $40,253 Expenses Cost of restaurant sales Restaurant operating expenses General and administrative Advertising Depreciation and amortization Impairment of long-lived assets 11,127 16,917 6,838 2,564 2,217 997 40,660 $391 11,090 16,745 5,309 2,657 2,107 0 37,908 $2,345 Total expenses Operating income Prepare a common-size analysis of this section of Ivanhoe Burgers' income statement. Your answers may not add perfectly due to rounding. (Round answers to 1 decimal place, e.g. 50.2%o.) 2016 2015 Total Revenues Expenses Cost of restaurant sales Restaurant operating expenses General and administrative

Explanation / Answer

a) A common size analysis of an income statement states every line item of the statement as a percentage of total revenues or sales. It facilitates teh comparison of income and expenses and provides a better understanding of the financial position of the company.

Common size analysis of Ivanhoe Burgers' Income statement

2016 2015 Total revenues $41051 100% $40253 100% Expenses Cost of restaurant sales 11,127 27.1% 11,090 27.6% Restaurant operating expenses 16,917 41.2% 16,745 41.6% General and administrative 6,838 16.7% 5,309 13.19% Advertising 2,564 6.2% 2,657 6.6% Depreciation and amortization 2,217 5.4% 2,107 5.2% Impairment of long-lived assets 997 2.4% 0 0 Total expenses 40,660 99.04% 37,908 94.17% Operating Income 391 0.95% 2,345 5.83%

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