Please complete a horizontal and vertical analysis of the Income Statements for

Question

Please complete a horizontal and vertical analysis of the Income Statements for the past three years (all yearly balances set as a percentage of total revenues for that year:

Income Statement Get Income Statement for: View: Annual Data | Quarterly Data All numbers in thousands Period Ending Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Total Revenue 194,673,000   182,150,000   162,463,000   Cost of Revenue 38,585,000   33,595,000   32,920,000   Gross Profit 156,088,000   148,555,000   129,543,000   Operating Expenses Research Development - - - Selling General and Administrative 13,721,000   13,282,000   11,870,000   Non Recurring - - - Others 111,009,000   103,676,000   92,693,000   Total Operating Expenses - - - Operating Income or Loss 31,358,000   31,597,000   24,980,000   Income from Continuing Operations Total Other Income/Expenses Net - - - Earnings Before Interest And Taxes 31,358,000   31,597,000   24,980,000   Interest Expense 3,253,000   2,801,000   2,744,000   Income Before Tax 28,105,000   28,796,000   22,236,000   Income Tax Expense 7,935,000   8,951,000   6,924,000   Minority Interest (298,000) (369,000) (488,000) Net Income From Continuing Ops 20,170,000   19,845,000   15,312,000   Non-recurring Events Discontinued Operations - - - Extraordinary Items - - - Effect Of Accounting Changes - - - Other Items - - - Net Income 19,872,000   19,476,000   14,824,000   Preferred Stock And Other Adjustments - - - Net Income Applicable To Common Shares 19,872,000   19,476,000   14,824,000  

Explanation / Answer

Vertical analysis of the income statements is as follows:

In vertical analysis every item is presented as a percentage of sales or revenue.

Horizontl analysis of income statements:

In horizontal analysis, every item is expressed as an incremental or decrease in that particular item compared to a base year in this question it is 2012.

Period ending 31-Dec-14 Percent 31-Dec-13 Percent 31-12-12 Percent Total revenue 194673000 100% 182150000 100.00% 162463000 100% Cost of revenue 38585000 19.82% 33595000 18.44% 32920000 20% Gross profit 156088000 80.18% 148555000 81.56% 129543000 80% Operating expenses Research and development Selling, general and administrative 13721000 7.05% 13282000 7.29% 11870000 7% Non recurring 0.00% 0 0.00% 0 0% Others 111009000 57.02% 103676000 56.92% 92693000 57% Operating income or loss 31358000 16.11% 31597000 17.35% 24980000 15% Income from continuing operations Total other income/expenses net 0 0.00% 0 0.00% 0 0% Earnings before interest and taxes 31358000 16.11% 31597000 17.35% 24980000 15% Interest expense 3253000 1.67% 2801000 1.54% 2744000 2% Income before tax 28105000 14.44% 28796000 15.81% 22236000 14% Income tax expense 7935000 4.08% 8951000 4.91% 6924000 4% Minority interest -298000 -0.15% -369000 -0.20% -488000 0% Net income from continuing operations 20170000 10.36% 19845000 10.89% 15312000 9% Non recurring events 0.00% 0% Discontinued operations 0 0.00% 0 0.00% 0 0% Extraordinary items 0 0.00% 0 0.00% 0 0% Effect of accounting changes 0 0.00% 0 0.00% 0 0% Other items 0 0.00% 0 0.00% 0 0% Net income 19872000 10.21% 19476000 10.69% 14824000 9% Preferred stock and other adjustments 0 0.00% 0 0.00% 0 0% Net income applicable to common stock 19872000 10.21% 19476000 10.69% 14824000 9%

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