Presented below is an income statement, with the past two years\' results presen

Question

Presented below is an income statement, with the past two years' results presented: 2016 2015 Revenue $4,200,000 $4,000,000 Cost of goods sold $2,910,000 $2,800,000 Gross profit $1,290,000 $1,200,000 Selling cost $280,000 $250,000 Administrative cost $140,000 $120,000 Operating profit $870,000 $830,000 Interest expense $78,000 $80,000 Income before taxes $792,000 $750,000 Income taxes $277,200 $262,500 Net income $514,800 $487,500

Prepare a vertical analysis of both 2016 and 2015. Display percentages to 3 decimal places (.654 = 65.4%). Discuss any line items from the income statement that may warrant further investigation from management.

Explanation / Answer

Answer:

Comparative Income Statement For the year ended Particulars 2016 % 2015 % Revenue 4200000 100 4000000 100 Cost of goods sold 2910000 69.28571 2800000 70 Gross Profit 1290000 30.71429 1200000 30 Selling cost 280000 6.666667 250000 6.25 Administrative cost 140000 3.333333 120000 3 Total operating expenses 420000 10 370000 9.25 Operating Profit 870000 20.71429 830000 20.75 Interest expense 78000 1.857143 80000 2 Income before tax 792000 18.85714 750000 18.75 Income tax 277200 6.6 262500 6.5625 Net income 514800 12.25714 487500 12.1875

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