Chapter 1 The Role of Accounting in Business 47- What is the percentage of net income to sales for Tootsie Roll? Round to one decimal
place. - Compare your answers to (2) and (3) with those of Hershey Foods Corporationin Case 1-1.
What are your conclusions?
The following data (in millions of dollars) were adapted from the January 29, 2005 and 2004
financial statements of The GAP Inc.:For year ending 2005 2004
Sales $16,267 $15,854
Cost of sales 9,886 9,885
Operating expenses 4,296 4,068- Prepare a horizontal analysis income statement for GAP that includes gross profit and
operating income before taxes. Round to one decimal place. - Comment on the results of your horizontal analysis of GAP.
The telecommunications industry suffered a severe business downturn during the early part of
this decade. Lucent Technologies Inc.is one of the major equipment providers to this industry.
Below are the comparative income statements for Lucent Technologies for the fiscal years ended
September 30, 2004 and 2003.Case 1-3
Horizontal analysis
Case 1-4
Horizontal analysis
Lucent Technologies Inc.
Consolidated Statements of Income
For the Years Ended September 30, 2004 and 2003In millions
2004 2003
Revenues $ 9,045 $ 8,470
Costs of revenues 5,266 5,818
Gross profit $ 3,779 $ 2,652
Operating expenses:
Selling, general, and administrative $ 1,296 $ 1,509
Research and development 1,270 1,488
Total operating expenses $ 2,566 $ 2,997
Operating income (loss) $ 1,213 $ (345)
Other income (expense)—net 246 (305)
Interest expense (396) (353)
Income (loss) from continuing operations before
income tax (expense) benefit $ 1,063 $ (1,003)
Income tax (expense) benefit 939 233
Income (loss) from continuing operations $ 2,002 $ (770)- Prepare a horizontal analysis income statement for Lucent Technologies.
- Interpret your analysis.