Required: 1. Complete the vertical analysis by computing each missing line item

Question

Required: 1. Complete the vertical analysis by computing each missing line item as a percentage of sales revenues (Round your answers to the nearest whole percent.) SIMULTECH CORPORATION Income Statement (summarized) (in millions of U.S. dollars) Current Year Previous Year $ 2,060 1,537 433 43 12 35 100%, $ 2,455 1,821 446 15 16 157 24 %, $ 133 1001% Sales Revenues Cost of Goods Sold Selling, General, and Administrative Expenses Other Operating Expenses Interest Expense Income before income taxes Income Tax Expense Net Income 75 18 2 2 30 2. Does Simultech's Cost of Goods sold for the current year, as a percentage of revenues, represent better or worse performance as compared to that for the previous year? Better Worse 3. Has Simultech's net profit margin has increased or decreased, over the two years? Increased Decreased

Explanation / Answer

Solution:

Part 1 – Vertical Analysis

Income Statement (summarized)

(in millions of US dollars)

Current Year

Previous Year

Sales Revenue

$2,060

100.00%

$2,455

100.00%

Cost of Goods sold

$1,537

74.61%

(1537/2060)

$1,821

74.18%

(1821/2455)

Selling, General and Administrative Expenses

$433

21.02%

(433/2060)

$446

18.17%

(446/2455)

Other Operating Expenses

$43

2.09%

(43/2060)

$15

0.61%

(15/2455)

Interest Expenses

$12

0.58%

(12/2060)

$16

0.65%

(16/2455)

Income before income taxes

$35

1.70%

(35/2060)

$157

6.40%

(157/2455)

Income tax expenses

$5

0.24%

(5/2060)

$24

0.98%

(24/2455)

Net Income

$30

1.46%

(30/2060)

$133

5.42%

(133/2455)

Note --- All the percentage is calculated by taking base Sales

Part 2 – Better

Part 3 -- Decreased

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Income Statement (summarized)

(in millions of US dollars)

Current Year

Previous Year

Sales Revenue

$2,060

100.00%

$2,455

100.00%

Cost of Goods sold

$1,537

74.61%

(1537/2060)

$1,821

74.18%

(1821/2455)

Selling, General and Administrative Expenses

$433

21.02%

(433/2060)

$446

18.17%

(446/2455)

Other Operating Expenses

$43

2.09%

(43/2060)

$15

0.61%

(15/2455)

Interest Expenses

$12

0.58%

(12/2060)

$16

0.65%

(16/2455)

Income before income taxes

$35

1.70%

(35/2060)

$157

6.40%

(157/2455)

Income tax expenses

$5

0.24%

(5/2060)

$24

0.98%

(24/2455)

Net Income

$30

1.46%

(30/2060)

$133

5.42%

(133/2455)

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.