Question: Vertical Analysis of the Income statement Company ACompany BNet sales2,300,000300,000Cost of goods sold1,100,000200,000Gross profit1,200,000100,000Operating Expenses: Administrative expenses120,00020,000 Marketing expenses220,00030,000 Research and Development500,00010,000Total Operating expenses840,00060,000Interest expense200,00010,000Net income160,00030,000 Required:Prepare a vertical analysis of these two companies.Compare and contrast the financial situation of these two companies assuming that they are in the same industry. Discuss fully.

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Answered: Question: Vertical Analysis of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question: Vertical Analysis of the Income statement

	Company A	Company B
Net sales	2,300,000	300,000
Cost of goods sold	1,100,000	200,000
Gross profit	1,200,000	100,000
Operating Expenses:
Administrative expenses	120,000	20,000
Marketing expenses	220,000	30,000
Research and Development	500,000	10,000
Total Operating expenses	840,000	60,000
Interest expense	200,000	10,000
Net income	160,000	30,000

Required:

Prepare a vertical analysis of these two companies.
Compare and contrast the financial situation of these two companies assuming that they are in the same industry. Discuss fully.

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