| Course | MT482 Financial Statement Analysis |
|---|---|
| Unit | Unit 3 |
| Paper type | Common-size analysis |
| Length | About 840 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for MT482 Unit 3
A 3.8-Point Gap, Line by Line: An MT482 Unit 3 Common-Size Analysis of a Regional and a National Billboard Company
[Student Name]
Purdue University Global
MT482: Financial Statement Analysis
Unit 3 Common-Size Analysis
[Instructor Name]
[Date]
Wabash Outdoor, the national peer and every figure are composite; the sources cited are real.
Why Common Size
A regional company with $380 million of revenue cannot be compared directly with a national one many times its size; every dollar figure is larger for the bigger firm. Restating each line as a percentage of revenue, for the income statement, or of total assets, for the balance sheet, removes size and shows where each company spends and invests differently. Subramanyam (2014) describes common-size statements as the quickest way to find where two firms' structures diverge before turning to ratios. The comparison sets Wabash Outdoor, the composite operator followed through the course, beside a composite national outdoor company, with a trend column for Wabash's 2024 figures.
The Income Statement
Site leases, the ground rent paid to landowners, take 23.3 percent of Wabash's revenue against the peer's 22.6, a difference of 0.7 points. Other direct costs, mainly posting crews, vinyl production, digital power and maintenance, take 9.3 percent against 8.6. Total direct costs therefore take 32.6 percent against 31.2.
Selling and administrative costs take 19.2 percent of Wabash's revenue against 17.4 for the peer, the largest single gap, 1.8 points. Corporate overhead takes 5.2 percent against 4.6.
EBITDA margin follows: 43.0 percent for Wabash, 46.8 for the peer, a gap of 3.8 points. Of that gap, 1.4 points come from direct costs and 2.4 from selling, administrative and overhead costs.
Most of the margin gap sits in the sales force and head office, not in the ground under the signs.
Below EBITDA
Depreciation and amortization absorb 15.1 percent of Wabash's revenue against 13.1 for the peer, because Wabash has recently built digital faces and bought structures, and new assets carry high depreciation. Operating margin is therefore 28.0 percent against 33.7, a gap of 5.7 points. Penman (2013) separates operating profitability from financing effects, and on that view Wabash's weaker operations explain most of its lower returns before interest is even considered. Interest takes 11.6 percent of Wabash's revenue against 7.9 for the peer, reflecting heavier borrowing relative to its size. Before the one-time gain on structures sold, pretax income is 16.4 percent of revenue for Wabash and 25.8 for the peer.
The Balance Sheet
On the balance sheet, structures and digital equipment make up 30.2 percent of Wabash's total assets against 26.5 for the peer. Goodwill and site permits make up 28.4 percent against 34.1, since the national peer has grown more by acquisition. Right-of-use assets for site leases make up 22.9 percent against 21.0. Cash is 1.5 percent of assets against 2.4.
On the other side, debt equals 38.1 percent of Wabash's assets against 31.6 for the peer, lease liabilities 24.4 against 22.8 and equity 30.4 against 38.9.
The 2024 Trend
Wabash's own trend column shows the gap narrowing. Its EBITDA margin rose from 40.9 percent in 2024 to 43.0 in 2025, mainly because digital faces, which carry less rent per revenue dollar, grew as a share of revenue. Selling and administrative costs fell from 19.8 to 19.2 percent of revenue as the same sales staff sold more digital slots.
What the Comparison Means
Three conclusions follow. First, Wabash's site economics are close to the peer's; ground rent is not its problem. Second, its selling and overhead costs are high for its size, partly because a regional company cannot spread a head office over as much revenue, and partly because its secondary markets need more sales calls per dollar of business. Third, its heavier depreciation and interest reflect recent investment and borrowing, which Unit 4 tests for safety and Unit 7 for cash. Fridson and Alvarez (2022) caution that common-size differences show where to look, not why; the reasons here come from the company's markets and strategy, which the next units examine.
What Management Could Do With the Gap
The common-size results point to specific actions. If Wabash could bring selling and administrative costs to the peer's 17.4 percent of revenue, its EBITDA would rise by about $6.8 million a year, worth far more than any feasible saving on ground rent. Options include selling digital slots through an online platform for small advertisers, which needs fewer sales calls per dollar, and sharing back-office functions such as billing and proof-of-posting with a larger operator. Overhead is harder to cut without shrinking the company, but it would fall as a share of revenue if digital conversion keeps raising revenue on the same structures. None of these steps changes the heavier depreciation and interest, which are the cost of the company's recent growth and are judged in later units.
Limits
The peer is composite and its cost classifications may differ from Wabash's; some companies report posting crews under selling costs. Gaps under half a point are treated as noise, and the analysis does not rely on any such difference.
References
Fridson, M. S., & Alvarez, F. (2022). Financial statement analysis: A practitioner's guide (5th ed.). Wiley.
Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). McGraw-Hill Education.
Subramanyam, K. R. (2014). Financial statement analysis (11th ed.). McGraw-Hill Education.
What the MT482 Unit 3 assignment asks for
The Unit 3 assignment in MT482 asks you to compare two companies of different sizes with common-size statements. Express income statement lines against sales and balance sheet lines against total assets. Choose a comparison company in the same industry, often a larger rival, and add your company's prior year as a trend column. Then find the largest gaps and trace them to specific lines, separating operating costs from financing costs. Say what the gaps suggest about the company's strategy and costs, and what management could change. Set a threshold below which differences are treated as noise. Two common-size income statements and two balance sheets with a short interpretation are typical. Cost classifications can differ between companies, so note any line where definitions may not match before reading too much into it.
Inside the MT482 Unit 3 example
The analysis explains why common size removes the effect of scale, citing Subramanyam. The income statement section compares site leases, other direct costs, selling and administrative costs and overhead, then splits the EBITDA gap between site costs and selling costs, with a highlighted sentence placing most of the gap in sales and head office costs. Below EBITDA, depreciation and interest widen the gap, with Penman on separating operations from financing. The balance sheet compares structures, goodwill, lease assets, cash, debt and equity. The trend column shows margin improving as digital faces grow. A section concludes that site economics match the peer while selling costs do not, and estimates the EBITDA gain from matching the peer's selling ratio. The limits set a half-point threshold for meaningful gaps.
Reading the MT482 Unit 3 grading rubric
Common-size analyses earn credit for tracing gaps to specific lines. Instructors look for complete restatements of both statements, with a comparison company and a trend year. Splitting a margin gap into its components, such as site costs versus selling costs, is the central analytical marking point. Separating operating from financing differences shows understanding of how profitability is built. Connecting gaps to strategy and markets, rather than only reporting them, demonstrates judgment. Estimating what closing a gap would be worth turns analysis into a management recommendation. Noting classification differences and setting a materiality threshold show care. Clear side-by-side tables make the comparison easy to grade.
MT482 Unit 3 help: mistakes that cost points
The most frequent Unit 3 weakness is presenting common-size tables without interpreting them. Another is comparing companies from different industries, so gaps reflect business models rather than performance. Students often focus on the largest line, such as cost of sales, without checking whether it actually differs. Small differences are sometimes treated as findings. Financing costs are frequently mixed with operating costs, blurring where the gap comes from. Before submitting, list the three largest gaps between your companies and write one sentence on the likely cause of each. Then check whether any gap could come from different classification of the same cost. Finally, estimate in dollars what closing the most actionable gap would be worth.
Get an MT482 Unit 3 example written to your instructions
Upload the supplied statements, or identify the company and rival your section is analyzing, and include the Unit 3 instructions and rubric. Every line gets restated for both firms, each meaningful gap is explained where it appears, and a trend view of your company's own years is added. First custom sample: free, generally 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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- MT482 Unit 6: Seminar Reflection
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MT482 Unit 3 questions, answered
Why compare with a much larger company?
Because in consolidated industries the rival that earns money most like the subject is often the bigger one. The common-size method exists to remove that size difference. What matters is that both firms earn money the same way; the sample explains the choice in its opening paragraph, which is what graders look for when the benchmark's revenue is several times the subject's.
Should balance sheet percentages use total assets?
Yes in most sections, though total liabilities and equity gives the same result since the two totals are equal. The sample divides every balance sheet line, assets and claims alike, by total assets of 1,806.13 million, and every income statement line by revenue. Mixing the bases within one statement is the error to avoid.
What counts as a meaningful gap?
No fixed threshold exists, but the sample highlights differences above one point of revenue and explains smaller ones only when they connect to the business model, like the 0.7-point lease gap. A gap is meaningful when it changes the conclusion about profitability or risk, and the written reading should say which gaps meet that test.
Where can I find a free MT482 Unit 3 sample paper?
The full MT482 Unit 3 analysis is printed here, comparing a composite regional billboard company with a national peer line by line.
Where does the margin gap come from in the MT482 Unit 3 sample?
Mostly selling, administrative and overhead costs, 2.4 of the 3.8 points; ground rent and other site costs account for the remaining 1.4.