Here are the comparattive income statements of Georgia Development Corporation.
ID: 2470039 • Letter: H
Question
Here are the comparattive income statements of Georgia Development Corporation.
Georgia development corporation
Comparative income statements
For the years ended December 31
December 31, 2014 December 31, 2013
Net sales $600,000 $500,000
Cost of goods sold 414,000 350,000
Gross profit 186,000 150,000
Operating expenses 150,000 120,000
Net income $36,000 $30,000
Instructions (A) prepare a horizontal analysis of the income statement data for Georgia Development Corporation using 2013 as a base (show the amounts of increase of decrease.) (B) prepare a vertical analysis if the income statement data for Georgia Development corporation for both years.
Explanation / Answer
Answer:
a)
The company is showing a healthy growth in all the figures bot top line and bottom line. The % gross profit has increased is even higher than the % net sales increase over last year. This show the company has improved in its economy of scale. But this improvement has been nullified by the corresponding increase in operating expenses %.
b)
There is not much variation in vertical analysis. The companies performance here is stable as last year.
Horizontal analysis December 31, 2014 December 31, 2013 Amount - Increase over base % increase over base Net sales 600000 500000 100000 20.00% Cost of goods sold 414000 350000 64000 18.29% Gross Profit 186000 150000 36000 24.00% Operating Expenses 150000 120000 30000 25.00% Net Income 36000 30000 6000 20.00%Related Questions
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