st 1 -u ($ and units in 000s) Units Sales COGS Gross Profit Selling Expense Administrative Expense Operating Income Other Income (Expense) Net Income 2018 80 1,200 720 480 204 216 60 84 144 100% 2017 62.5 1,000 500 500 250 150 100 0 100 100% Required: Using vertical analysis, evaluate the results of operations in 2017 and 2018. Quantify the percentages of each line item to sales. Evaluate the drivers of net income, including gross profit, selling and administrative expenses, and other income. What is the overall percentage point change in profitability and what is the contribution (positive or negative) of each driver. Explain the effect of each driver on profitability and the possible scenarios of each based on the data above. Which are areas of concern? Which areas are positive? What additional questions would you have? Analysis/Explaination
st 1 -u ($ and units in 000s) Units Sales COGS Gross Profit Selling Expense Administrative Expense Operating Income Other Income (Expense) Net Income 2018 80 1,200 720 480 204 216 60 84 144 100% 2017 62.5 1,000 500 500 250 150 100 0 100 100% Required: Using vertical analysis, evaluate the results of operations in 2017 and 2018. Quantify the percentages of each line item to sales. Evaluate the drivers of net income, including gross profit, selling and administrative expenses, and other income. What is the overall percentage point change in profitability and what is the contribution (positive or negative) of each driver. Explain the effect of each driver on profitability and the possible scenarios of each based on the data above. Which are areas of concern? Which areas are positive? What additional questions would you have? Analysis/Explaination
Chapter12: Corporate Valuation And Financial Planning
Section: Chapter Questions
Problem 12SP
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Transcribed Image Text:($ and units in 000s)
Units
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Sales
COGS
Gross Profit
Selling Expense
Administrative Expense
Asking Operating Income
Ask one qu Other Income (Expense)
Keep quest Net Income
include all
2018
80
1,200
720
480
204
216
60
84
144
100%
2017
62.5
MAY
30
1,000
500
500
250
150
100
0
100
100%
Required:
Using vertical analysis, evaluate the results of operations in 2017 and 2018. Quantify the percentages of each line item to sales.
Evaluate the drivers of net income, including gross profit, selling and administrative expenses, and other income. What is the
overall percentage point change in profitability and what is the contribution (positive or negative) of each driver. Explain the
effect of each driver on profitability and the possible scenarios of each based on the data above. Which are areas of concern?
Which areas are positive? What additional questions would you have?
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