Included in full: an FIN 320 Module 2 financial statement analysis that presents common-size income statements and balance sheets for two years in tables, compares each line across years and with sales growth, and interprets the key shifts in margins, inventory and financing. Searches like "fin 320 module 2 assignment", "fin320 module 2 financial statement analysis paper" and "fin 320 module 2 example" land here.
The FIN 320 Module 2 example, in full
Reading the Shifts: A Two-Year Common-Size Analysis of a Composite Pet Supply Retailer
[Student Name]
Southern New Hampshire University
FIN 320: Principles of Finance
Module Two Assignment
[Instructor Name]
[Date]
The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.
Reading the Shifts: A Two-Year Common-Size Analysis of a Composite Pet Supply Retailer
Why Common-Size Statements
Brightwater Pet Supply, Inc. is a composite publicly traded retailer of pet food, supplies and grooming services with about 240 stores. Its sales grew from 1.84 billion dollars in fiscal 2024 to 1.97 billion dollars in fiscal 2025, an increase of 7.2 percent. When a company grows, almost every dollar figure on its statements grows too, which makes raw comparisons hard to read: higher expenses might mean inefficiency or might simply reflect more sales. Common-size statements solve this by expressing each income statement line as a percentage of sales and each balance sheet line as a percentage of total assets, so that changes in the structure of the business stand out (Dahlquist & Knight, 2022).
Common-Size Income Statement
Table 1 shows the income statement in common-size form.
Table 1
Common-Size Income Statements, Brightwater Pet Supply, Fiscal 2024 and 2025
| Line, as % of net sales | Fiscal 2024 | Fiscal 2025 | Change (points) |
|---|---|---|---|
| Cost of goods sold | 65.0% | 65.6% | +0.6 |
| Gross profit | 35.0% | 34.4% | -0.6 |
| Selling, general and administrative | 26.5% | 26.3% | -0.2 |
| Depreciation | 2.5% | 2.6% | +0.1 |
| Operating income | 6.0% | 5.5% | -0.5 |
| Interest expense | 1.0% | 1.1% | +0.1 |
| Income taxes | 1.2% | 1.1% | -0.1 |
| Net income | 3.8% | 3.4% | -0.4 |
Note. Composite figures. Net sales were $1,840 million in 2024 and $1,972 million in 2025.
What the Income Statement Shows
The company sold more but kept less of each sale. Gross margin slipped 0.6 points, from 35.0 to 34.4 percent, which on 1.97 billion dollars of sales is about 12 million dollars of gross profit that would have been earned at the prior year's margin. The likely causes are promotional pricing and a shift toward lower-margin food, both of which management's commentary would need to confirm. Operating expenses were well controlled: selling, general and administrative costs grew 6.4 percent, slightly slower than sales, and fell to 26.3 percent of sales. That discipline was not enough to offset the weaker gross margin, so operating income fell from 6.0 to 5.5 percent of sales. Interest rose to 1.1 percent of sales as borrowing increased, and net income fell from 3.8 to 3.4 percent. In dollars, net income declined from about 70.1 million to 66.1 million dollars even though sales rose by 132 million.
Common-Size Balance Sheet
Table 2 shows the balance sheet in common-size form.
Table 2
Common-Size Balance Sheets, Brightwater Pet Supply, Fiscal Year End 2024 and 2025
| Line, as % of total assets | Fiscal 2024 | Fiscal 2025 |
|---|---|---|
| Cash | 6.3% | 4.6% |
| Accounts receivable | 3.8% | 3.7% |
| Inventory | 28.3% | 30.4% |
| Other current assets | 2.2% | 2.2% |
| Property and equipment, net | 50.7% | 50.9% |
| Other assets | 8.7% | 8.3% |
| Accounts payable | 16.0% | 15.4% |
| Accrued liabilities | 9.3% | 8.9% |
| Short-term debt | 2.0% | 3.1% |
| Long-term debt | 30.7% | 32.8% |
| Other long-term liabilities | 7.3% | 7.0% |
| Shareholders' equity | 34.7% | 32.7% |
Note. Composite figures. Total assets were $1,010 million in 2024 and $1,112 million in 2025.
What the Balance Sheet Shows
Two lines moved most. Inventory rose from 28.3 to 30.4 percent of assets; in dollars it grew 18.2 percent, from 286 million to 338 million, more than twice the rate of sales growth. Cash fell from 6.3 to 4.6 percent of assets, from 64 million to 51 million dollars. On the financing side, debt rose from 32.7 to 35.9 percent of assets combining short-term and long-term borrowing, while equity fell from 34.7 to 32.7 percent. Accounts payable fell slightly as a share of assets, meaning suppliers financed a smaller portion of the larger inventory. Property and equipment kept a steady share of about 51 percent, consistent with new stores opening at roughly the pace of overall growth.
Reading the Two Statements Together
The most important finding appears only when the statements are read side by side. Brightwater borrowed to carry inventory that grew faster than its sales, while earning a thinner margin on those sales. The extra 52 million dollars of inventory was financed partly by drawing down cash and partly by 70 million dollars of new debt, and the interest on that debt is already visible in the income statement. If the inventory build reflects preparation for new stores and seasonal demand, it may be temporary; if it reflects slow-moving products, it may lead to markdowns that would push gross margin down further. Common-size analysis cannot tell which, but it identifies exactly where to look (Ross et al., 2022). The notes to the financial statements and management's discussion in the annual report are the next places to read, since public companies must explain material changes in inventory and liquidity there (U.S. Securities and Exchange Commission [SEC], 2011).
What Common-Size Analysis Cannot Show
The method has limits that shape how far its conclusions can be pushed. Percentages hide scale: a line that holds a steady share of a growing base is still growing in dollars, as property and equipment did here, rising by 54 million dollars while its share barely moved. A change in one line also changes every other line's share, so a falling cash percentage partly reflects the larger inventory rather than a separate event. The balance sheet is a snapshot of one day, the last day of the fiscal year, and a retailer's inventory on that day depends heavily on the season; a company that ends its year before the holidays will look very different from one that ends after. Accounting choices matter as well. If Brightwater used a different inventory costing method from its competitors, its gross margin and inventory percentages would not be directly comparable with theirs. Finally, the common-size statements say nothing about cash flow. A company can show stable percentages while its operating cash flow falls because customers are paying more slowly or inventory is piling up, which is why the statement of cash flows belongs alongside these tables in any complete analysis. These limits do not weaken the findings above, but they explain why the next step is to measure specific relationships with ratios rather than to rely on shares of totals alone.
Questions for the Ratio Analysis
The common-size results set three questions for the next stage of analysis. How quickly is inventory turning, and how many days of sales does it represent compared with the prior year? Can the company meet its short-term obligations comfortably with less cash and more short-term debt? And how has the mix of debt and equity changed the return earned by shareholders? Ratio analysis in the next milestone will measure each of these directly, and comparison with competitors will show whether Brightwater's shifts are its own or common to the industry.
References
Dahlquist, J., & Knight, R. (2022). Principles of finance. OpenStax. https://openstax.org/details/books/principles-finance
Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2022). Fundamentals of corporate finance (13th ed.). McGraw Hill.
U.S. Securities and Exchange Commission. (2011). Beginners' guide to financial statements. https://www.sec.gov/about/reports-publications/beginners-guide-financial-statements
How this FIN 320 Module 2 example is structured
The paper begins by explaining why raw dollar figures mislead when a company is growing. The common-size income statement comes next, followed by the common-size balance sheet, each in a table with a paragraph of comparisons. A section then connects the two statements, because the most important finding appears only when they are read together. The paper closes with questions the ratio analysis should answer.
Get FIN 320 Module 2 written to your instructions
Share your FIN 320 Module 2 instructions and rubric with the company you are analyzing. A statement analysis that compares every figure and explains what the shifts mean comes back within 24 to 48 hours; the first one is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.
FIN 320 Module 2 questions, answered
What does FIN 320 Module 2 usually ask for?
Module 2 of a principles of finance course commonly focuses on financial statements and their analysis: reading the income statement, balance sheet and cash flow statement, and preparing common-size or trend comparisons that set up ratio analysis in later modules.
What is a common-size financial statement?
A common-size statement expresses each line as a percentage of a base figure: net sales for the income statement and total assets for the balance sheet. It removes the effect of company size, so a firm can be compared with itself over time or with competitors of different sizes.
Why compare each figure with something?
A number alone, such as 338 million dollars of inventory, says little. Compared with last year, with sales growth or with a competitor, it reveals whether inventory is rising faster than the business, which is the kind of information a manager or investor can act on.