Question

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ABC Company reports the following comparative income statement: 2017 Revenue $100,000 COGS 42,000 Gross Profit 58,000...

ABC Company reports the following comparative income statement:

2017

Revenue $100,000

COGS 42,000

Gross Profit 58,000

SGA Expenses 25,000

Income before tax 33,000

Income tax expense. 11,000

Net Income 22,000

2016

Revenue $70,000

COGS 25,000

Gross Profit 45,000

SGA Expenses 28,000

Income before tax 17,000

Income tax expense. 6,000

Net Income 11,000

Prepare a vertical and horizontal analysis for ABC Company and then calculate the profit margin for ABC Company

Expert Solution

All working forms part of the answer
Horizontal Analysis

	2017	2016	Increase (Decrease)	% Increase (Decrease)
Revenue	$ 100,000.00	$ 70,000.00	$ 30,000.00	42.86%
COGS	$ 42,000.00	$ 25,000.00	$ 17,000.00	68.00%
Gross Profit	$ 58,000.00	$ 45,000.00	$ 13,000.00	28.89%
SGA Expenses	$ 25,000.00	$ 28,000.00	$ (3,000.00)	-10.71%
Income before taxes	$ 33,000.00	$ 17,000.00	$ 16,000.00	94.12%
Income Tax Expense	$ 11,000.00	$ 6,000.00	$ 5,000.00	83.33%
Net Income	$ 22,000.00	$ 11,000.00	$ 11,000.00	100.00%

Vertical Analysis

	2017		2016
Revenue	$ 100,000.00	100.00%	$ 70,000.00	100.00%
COGS	$ 42,000.00	42.00%	$ 25,000.00	35.71%
Gross Profit	$ 58,000.00	58.00%	$ 45,000.00	64.29%
SGA Expenses	$ 25,000.00	25.00%	$ 28,000.00	40.00%
Income before taxes	$ 33,000.00	33.00%	$ 17,000.00	24.29%
Income Tax Expense	$ 11,000.00	11.00%	$ 6,000.00	8.57%
Net Income	$ 22,000.00	22.00%	$ 11,000.00	15.71%

Profit Margin

	2017	2016
Net Income	$ 22,000.00	$ 11,000.00
Revenues	$ 100,000.00	$ 70,000.00
Profit Margin %	22.00%	15.71%

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