Question

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  .

Answer 1

Working notes for the above answer is as udner

___________________________________________________________________________

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.