| Course | GF530 Financial Statement Analysis |
|---|---|
| Unit | Unit 3 |
| Paper type | Common size analysis |
| Length | About 910 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF530 Unit 3
A Franchisor and an Operator in Percentages: A Unit 3 Common Size Analysis Restated for the Lease Standard
[Student Name]
Purdue University Global
GF530: Financial Statement Analysis
Unit 3 Common Size Analysis
[Instructor Name]
[Date]
Both restaurant companies and every figure are composite and illustrative; the standard, article and textbook cited are real.
The Two Companies
Both companies run burger restaurants in the same regions, but they make money differently. The franchisor owns about a third of its 1,900 restaurants and licenses the rest, collecting royalties and fees. The operator owns and runs all of its 640 restaurants. In dollars, the operator's revenue is more than twice the franchisor's, so raw figures would suggest it is simply the bigger and more important business. Percentages show what each company actually is.
Step 1: Restating the Years Before the Lease Standard
Beginning in 2019, public companies had to bring most operating leases onto their balance sheets, booking a right-of-use asset and an equal lease liability (Financial Accounting Standards Board [FASB], 2016). Before then, the same leases appeared only in a note listing future minimum payments. A five-year trend that mixes the two treatments would show both companies' assets jumping in 2019, the operator's by roughly half, for a reason unrelated to how the restaurants performed.
To fix this, the 2017 and 2018 balance sheets were restated. The future lease payments listed in each year's commitments note were discounted at 4.5 percent, close to each company's disclosed borrowing rate, and the result was added to assets and liabilities. Research shows that credit analysts made similar adjustments long before the standard required them, and that lenders priced debt as if leases were already liabilities (Altamuro et al., 2014).
Step 2: Income Statements as a Percentage of Revenue
The franchisor. Royalties make up 62 percent of revenue, franchise fees 4 percent and sales at its own restaurants 34 percent. Costs at company restaurants take 28 percent of total revenue, rent and other costs on properties it subleases to franchisees 14 percent, general and administrative expense 12 percent and depreciation 8 percent. Operating margin is 38 percent.
The operator. Food and packaging take 29 percent of revenue, labor 32 percent, occupancy 11 percent, other restaurant operating costs 12 percent, general and administrative expense 6 percent and depreciation 2.5 percent. Operating margin is 7.5 percent.
*Commentary.* The franchisor's margin is five times the operator's because most of its revenue arrives without food or labor costs attached. Its franchisees bear those costs. A rise in wages or beef prices hits the operator directly and the franchisor only through slower franchisee sales.
Step 3: Balance Sheets as a Percentage of Total Assets
The operator. Cash 4 percent, receivables 1, inventory 1, property and equipment 46, right-of-use assets 34, goodwill 8 and other assets 6. On the other side, lease liabilities 38 percent, debt 30, payables and accrued items 12, other liabilities 5 and equity 15.
The franchisor. Cash 6 percent, receivables from franchisees 9, property and equipment 38, right-of-use assets 12, goodwill and intangibles 25 and other assets 10. On the other side, debt 64 percent, lease liabilities 13, payables 6, deferred franchise fees 5, other liabilities 4 and equity 8.
The operator's biggest obligation is rent, a third of its balance sheet, while the franchisor's is borrowed money, nearly two thirds of its balance sheet, so the two companies carry heavy fixed claims of different kinds, and only the restated figures make that comparison fair.
*Commentary.* The franchisor's thin equity and large debt reflect a common pattern among franchisors, which borrow against the steady royalty stream. Its receivables are much larger than the operator's because franchisees pay royalties monthly in arrears.
Step 4: Five-Year Trends, Indexed to 2017
Revenue. Operator: 100, 104, 109, 98 and 115 for 2017 to 2021. Franchisor: 100, 103, 107, 99 and 112. The 2020 dip, from pandemic dining-room closures, was similar for both.
Total assets, as reported. Operator: 100, 103, 152, 150 and 158. The 2019 jump of nearly half is the lease standard.
Total assets, restated. Operator: 100, 104, 106, 104 and 110. With leases capitalized in every year, assets grew modestly and in line with revenue.
Operating margin. The operator's margin fell from 8.3 percent in 2017 to 7.5 percent in 2021 as labor costs rose. The franchisor's held between 36 and 39 percent.
Limits of the Comparison
Two cautions apply. First, the restatement relies on a single discount rate for every lease, while the standard requires each lease to be measured at the rate in place when it began, so the restated 2017 and 2018 figures are approximations rather than exact matches. Second, the franchisor's percentages depend heavily on how many restaurants it owns at any time; selling forty company restaurants to franchisees would raise its margin and shrink its revenue without any change in how well the brand performs. A reader should check the restaurant count before treating a margin change as an improvement.
What the Analysis Shows
The operator is a labor- and rent-intensive business with modest margins and assets that grew only slowly once the accounting change is removed. The franchisor is a high-margin, debt-financed collector of royalties. Without the restatement, a reader would conclude the operator nearly doubled its asset base in 2019 and that its asset turnover collapsed. Analysts treat common size statements as the first step in any comparison precisely because they expose these structural differences before ratios are computed (Penman, 2013).
References
Altamuro, J., Johnston, R., Pandit, S., & Zhang, H. (2014). Operating leases and credit assessments. Contemporary Accounting Research, 31(2), 551-580. https://doi.org/10.1111/1911-3846.12033
Financial Accounting Standards Board. (2016). Leases (Topic 842) (Accounting Standards Update No. 2016-02). FASB.
Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). McGraw-Hill.
GF530 Unit 3 instructions, in plain terms
Unit 3 of GF530 asks for common size statements and a short interpretation. Before any percentages, check whether an accounting change breaks the trend you plan to show, and restate earlier years if it does, explaining your method. Rescale every line, revenue as the base for operating items and total assets as the base for balance sheet items, for each company and year. Index the key lines to a base year so trends can be read on one scale. Then interpret: what do the percentages reveal about how each company makes money, what it owns and how it is financed? Compare the restated and unrestated trends to show what the adjustment changed. Note the limits of your restatement. Cite the relevant standard, research on the adjustment and the course text in APA 7.
How the GF 530 Unit 3 example is put together
The sample begins by describing two burger chains with different business models and why dollars mislead. Step 1 explains the lease standard, the discounting of commitment notes and Altamuro and colleagues' evidence that lenders already treated leases as debt. Step 2 lists every income statement line in percentages for both firms with a commentary on who bears food and labor costs. Step 3 does the same for balance sheets, and the highlighted sentence contrasts the operator's rent obligations with the franchisor's borrowed money. Step 4 indexes revenue, reported assets and restated assets for five years, showing the 2019 jump disappear. A limits section notes the single discount rate and the effect of selling restaurants to franchisees. The conclusion, citing Penman, names the error the restatement prevented.
Reading the GF530 Unit 3 grading rubric
GF530 graders award the largest share of points for correct common size statements across every line, company and year. Restating earlier years for a comparability break is what distinguishes strong work in this unit, so the method and its source should be explained. The commentary gains credit when it explains business models, cost structures and financing rather than repeating percentages in words. Trend indexing earns credit when it is used to make a point, such as how much of an asset jump is accounting. Instructors in the MS in Finance program value acknowledged limits of any restatement. Clean tables or lists, consistent decimals, and APA 7 references to the standard, research and text complete the rubric.
GF530 Unit 3 help: mistakes that cost points
Many GF530 Unit 3 analyses compute percentages correctly and then compare years across an accounting change without noticing it, so a new standard looks like a strategy. Others restate without saying how, leaving the grader unable to check. Interpretation often restates the numbers in sentences instead of explaining what they mean for the business. Balance sheet percentages are sometimes taken against revenue rather than total assets. Trend tables are included but never discussed. If your assignment compares two hospitals, two retailers or one firm across a decade, the same path applies: fix comparability first, rescale both statements, index the trends and interpret the structure you find.
Get a GF530 Unit 3 example written to your instructions
Send the two firms, or the filings, your GF530 Unit 3 prompt assigns, plus its rubric and any instruction on base years or restatement. The analysis returns with vertical and horizontal tables, any accounting change restated before rescaling, and commentary that explains differences by business model. First custom sample free of charge; expect it within 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF530 Unit 3 questions, answered
Which changes justify restating earlier years?
Any change that moves the lines being compared: a new lease or revenue standard, a large acquisition, a discontinued segment. Each can shift a percentage with no change in operations. The sample restates two years from the lease note because its balance sheet comparison depends on it; a smaller change might warrant only a flagged footnote beside the affected column.
Can the analysis compare firms in different industries?
It can, and a few prompts are built around such a pairing, but the commentary has to explain structure rather than rank performance. Common size figures show how each firm's revenue and assets are composed. Across industries, the useful question is why the compositions differ, which is also why the sample pairs two restaurant models that look alike from the street but differ entirely in their statements.
Why index trends to a base year instead of showing growth rates?
Indexing lets every line be read on one scale, so a reader sees at a glance that selling costs grew faster than revenue. Year-over-year growth rates show the same movement but are harder to compare across lines. The sample uses a base of 100 and notes where that year sat in the cycle, because an index built on a recession year makes ordinary recovery look like growth.
Where can I find a free GF530 Unit 3 sample paper?
This page holds a complete GF530 Unit 3 common size analysis of a franchisor and a restaurant operator, restated for the lease standard, with trend indexes and APA 7 references.
Why restate the years before 2019?
The lease standard moved most operating leases onto balance sheets from 2019. Without restating earlier years, the operator's assets would appear to jump by about half in one year for purely accounting reasons.