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# Vertical Analysis of Income Statement The following comparative income statement (in thousands of dollars) for the...

Vertical Analysis of Income Statement

The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Motor Speedways Inc., owner and operator of several major motor speedways.

 Current Year Previous Year Revenues: Admissions $89,870$102,690 Event-related revenue 145,684 147,189 NASCAR broadcasting revenue 170,753 161,859 Other operating revenue 66,693 77,262 Total revenues $473,000$489,000 Expenses and other: Direct expense of events $97,911$97,800 NASCAR purse and sanction fees 116,358 117,849 Other direct expenses 16,082 21,027 General and administrative 187,308 221,028 Total expenses and other $417,659$457,704 Income from continuing operations $55,341$31,296

a. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. (Note: Due to rounding, amounts may not total 100%).

Round your percentages to one decimal place. Due to rounding differences, you will need to:

1. Calculate total expenses and other percentage by adding the expense percentages
2. Calculate the income from continuing operations percentage by deducting total expenses and other percentage from total revenue percentage.
 Motor Speedways Inc. Comparative Income Statement (in thousands of dollars) For the Years Ended December 31 Current Year Amount Current Year Percent Prior Year Amount Prior Year Percent Revenues: Admissions $89,870 %$102,690 % Event-related revenue 145,684 % 147,189 % NASCAR broadcasting revenue 170,753 % 161,859 % Other operating revenue 66,693 % 77,262 % Total revenues $473,000 %$489,000 % Expenses and other: Direct expense of events $97,911 %$97,800 % NASCAR purse and sanction fees 116,358 % 117,849 % Other direct expenses 16,082 % 21,027 % General and administrative 187,308 % 221,028 % Total expenses and other $417,659 %$457,704 % Income from continuing operations $55,341 %$31,296 %

b. While overall revenue   some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue   as a percent of total revenue by 3 percentage points, while the percent of admissions revenue to total revenue   by 2 percentage points. Overall, it appears that income from continuing operations has significantly improved because of  .

## Solutions

##### Expert Solution

Working notes for the above answer is as udner

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2

While overall revenue   some between the two years, the overall mix of revenue sources did change somewhat. The NASCAR broadcasting revenue   is increased as a percent of total revenue by 3 (36%-33%)percentage points, while the percent of admissions revenue to total revenue is decresed   by 2 (19%-21%)(percentage points. Overall, it appears that income from continuing operations has significantly improved because of  .Other direct expenses, however, decreased by about 1%, and general and administrative expenses decreased by almost 6%.

Overall, the income from continuing operations increased 5% percentage points of total revenue between the two years, which is a favorable trend.

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