Exercise 9-3 Horizontal and vertical analysis ncome statements for Gaidar Compan

Question

Exercise 9-3 Horizontal and vertical analysis ncome statements for Gaidar Company for 2014 and 2015 follow 2015 2014 Sales Cost of goods sold Selling expenses Administrative expenses interest expense Total expenses Income before taxes Income taxes expense Net income 300,000 $250.000 150,000 24,000 20,000 6,0008,000 $243,000 $202,000 48,000 12,000 192,000 30,000 15,000 57,000 14,000 $43,000 36,000 Required Round all percentages to one decimal point. a. Perform a horizontal analysis, showing the percentage change in each income statement component between 2014 and 2015. Perform a vertical analysis, showing each income statement component as a percent of sales for each year h.

Explanation / Answer

GAIDAR COMPANY: HORIZONTAL ANALYSIS: 2015 2014 % change Sales 300000 250000 20.00% Cost of goods sold 192000 150000 28.00% Selling expenses 30000 24000 25.00% Administrative expenses 15000 20000 -25.00% Interet expenses 6000 8000 -25.00% Total expenses 243000 202000 20.30% Income before taxes 57000 48000 18.75% Income tax expense 14000 12000 16.67% Net income 43000 36000 19.44% VERTICAL ANALYSIS: Sales 2015 % 2014 % Cost of goods sold 300000 100.00% 250000 100.00% Selling expenses 192000 64.00% 150000 60.00% Administrative expenses 30000 10.00% 24000 9.60% Interet expenses 15000 5.00% 20000 8.00% Total expenses 6000 2.00% 8000 3.20% Income before taxes 243000 81.00% 202000 80.80% Income tax expense 57000 19.00% 48000 19.20% Net income 14000 4.67% 12000 4.80% 43000 14.33% 36000 14.40%

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