Question

In: Accounting

Prepare a horizontal analysis of revenues and gross profit—both in dollar amounts and in percentages—for 2019...


Prepare a horizontal analysis of revenues and gross profit—both in dollar amounts and in percentages—for 2019 and 2018.

In millions)

                                    2019                                         2018               2017

Revenue                        $9,575                                    $9,300             $8,975

Cost of Goods Sold          6,250                                  6,000              5,890

Begin by calculating the gross profit for each​ year, then prepare a horizontal analysis of revenues and gross profit—both in dollar amounts and in percentages—for 2019 and 2018. ​(Enter amounts in millions as provided to you in the problem statement. Round the percentages to one decimal​ place, X.X%. Use a minus sign or parentheses to indicate a​ decrease.)

Solutions

Expert Solution

(a)

Gross Profit for 2019 = $3325

Gross Profit for 2018 = $3300

Calculation of Gross Profit:

Particulars 2019 2018 2017
Revenue (a)               9,575          9,300               8,975
Cost of Goods Sold (b)               6,250          6,000               5,890
Gross Profit (a - b)               3,325          3,300               3,085

(b)

There has been decrease in Revenue during 2019 as compared to 2018. The total increase in revenue during 2019 is $275 against $325 during 2018. In percentage terms, the increase in revenue during 2019 is 3.0% against 3.6% during 2018.

Further, There has been decrease in Gross Profit during 2019 as compared to 2018. The total increase in gross profit during 2019 is $25 against $215 during 2018. In percentage terms, the increase in gross profit during 2019 is 0.8% against 7.0% during 2018.

Analysis:

Particulars 2019 2018
Increase / (Decrease) in Revenue (c)
Formula: Revenue in Current Year - Revenue in previous year		 (9575 - 9300)             275 (9300 - 8975)            325
% Increase / (Decrease) in Revenue
Formula: Increase in Revenue as per (c) / Revenue during previous year		 (275 / 9300) 3.0% (325 / 8975) 3.6%
Increase / (Decrease) in Gross Profit (d)
Formula: Gross Profit in Current Year - Gross Profit in previous year		 (3325 - 3300)                25 (3300 - 3085)            215
% Increase / (Decrease) in Gross Profit
Formula: Increase in Gross Profit as per (d) / Gross Profit during previous year		 (25 / 3300) 0.8% (215 / 3085) 7.0%

ekkarill92 answered 1 year ago
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