The Mathematics of Money

(Darren Dugan) #1

496 Chapter 12 Financial Statements


utilities and $45,500 in other operating expenses. The company’s fi nancial statements included an $800,000 provision
for taxes, and $157,600 of interest expenses. Calculate the company’s (a) gross profi t, (b) EBIT, and (c) net income for
the year.

C. Vertical and Horizontal Analysis of Income Statements



  1. Complete a vertical analysis of the fi nancial statement given below:


Net Sales $19,508 (a)
Cost of goods sold $6,409 (b)
Gross profi t $13,099 (c)
Operating expenses $7,500 (d)
EBIT $5,599 (e)
Interest and taxes $2,000 (f)
Net income $3,599 (g)


  1. Fill in the missing items and complete a vertical analysis of the fi nancial statement given below:


Net sales $85,000 (d)
Cost of goods sold $27,500 (e)
Gross profi t (a) (f)
Operating expenses $62,500 (g)
EBIT (b) (h)
Interest and taxes $6,000 (i)
Net income (c) ( j)


  1. Complete a horizontal analysis for the income statement given below:


2008 2007 Amount Percent

Net sales $27,500 $19,508 (a) (h)
Cost of goods sold $9,955 $6,409 (b) (i)
Gross profi t $17,545 $13,099 (c) (j)
Operating expenses $6,445 $7,500 (d) (k)
EBIT $11,100 $5,599 (e) (l)
Interest and taxes $3,500 $2,000 (f) (m)
Net income $7,600 $3,599 (g) (n)


  1. Complete a horizontal analysis for 2007 for the company whose income statements for 2006 and 2007 are given
    below.


2006 Income Statement

Sales $275,043
Cost of goods sold $192,343
Gross profi t $82,700
Expenses $51,000
Net income $31,700
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