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Horizontal and Vertical Income Statement Analysis

Income statement for Shirley Company for 2005 and 2006 follow:

2006 2005

Sales 240,000 200,000

Cost of Goods Sold 147,900 108,000
Selling Expenses 40,100 22,000
Admin Expenses 24,000 28,000
Interest Expenses 6,000 12,000

Total Expenses 218,000 170,000

Income Before Taxes 22,000 30,000
Income Taxes Expense 6,000 8,000

Net Income 16,000 22,000

A. Perform a horizontal analysis showing the percentage change in each income statement component between 2005 and 2006.

B. Perform a vertical analysis , showing each income statement component as a percent of sales for each year.

Solution Summary

This solution conducts a horizontal and vertical analysis based on the income statements for two consecutive years for Shirley Company

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