1. Please provide a vertical and horizontal analysis Verhcal Income Statement 20
ID: 2567274 • Letter: 1
Question
1. Please provide a vertical and horizontal analysis Verhcal Income Statement 2002 2001 Net Sales Less: Cost of Goods Sold 9,893 6,005 9,489 5,785 Gross Profit Less: Operating Expenses 3,888 2,820 3,704 2,690 Operating Income Less: Interest Expense Less: Other Expenses Plus: Unusual Gain 1,068 48 1,014 59 34 Income Before Taxes Less: Taxes Rel. to Oper. 1,017 349 921 332 … … 590 668 NI before Nonrec. Items Less: Ef. Of Acct. Change 590 Net Income 663 2. Please explain analysis of the vertical and horizontal analysis?Explanation / Answer
Vertical analysis of Income Statement
It is analysis of displaying the percent form of all items of financial statements in ration of sales. Sales is the basis for analysing.
It helps in comparing the rations and studying various effects of ratio which are crucial for business in this competitive age
formula = (items of statement / Sales) * 100
Horizontal analysis of Income statement
It is used to display the percentage form or absolute form of change occurred from previous year to current year
It is like variance calculation between the data of 2 year.
For calculating percentage base year is always previous i.e. 2001 in this case
Note : There is slight (minor) mistake in question
In year 2001
$589
but question says $590
It may be assumed that $1 is 'Unusual gain' in income statement
Particulars 2002(Amount) 2002(percentage) 2001 (amount) 2001(percentage) Net Sales $9893 100% $9489 100% Less : cost of goods sold $6005 60.7% $5785 60.97% Gross profit $3888 39.3% $3704 39.03% Less : operating expenses $2828 28.59% $2690 28.35% Operating Income $1068 10.8% $1014 10.69% Less : Interest Expense $48 0.49% $59 0.6% Less : other expenses $3 0.03% $34 0.36% Income before taxes $1017 10.28% $921 9.71% Less : Taxes $349 3.53% $332 3.5% Net income before non recurring items $668 6.75% $590 6.22% Less : effect of accounting change $5 0.05% - 0% Net Income $663 6.7% $590 6.22%Related Questions
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