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    Vertical Analysis

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    Sanchez Company reported the following operating results for 2 consecutive years.

    2004 Amount Percent of Sales

    Sales 500,000
    Cost of Goods Sold 320,000

    Gross Margin 180,000
    Operating Expenses 100,000

    Income Before Taxes 80,000
    Income Taxes 24,000

    Net Income 56,000

    2005 Amount Percent of Sales

    Sales 480,000
    Cost of Goods Sold 307,000

    Gross Margin 173,000
    Operating Expenses 120,000

    Income Before Taxes 53,000
    Income Taxes 16,000

    Net Income 37,000

    Express each income statement component for each of the two years as a percent of sales.

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    Solution Summary

    This solution conducts a vertical analysis for a company.