Question

In: Accounting

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

Solutions

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%

ekkarill92 answered 2 years ago
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