Question

Horizontal Analysis of Income Statement The following data (in millions) are taken from the financial statements of Tarrow Corporation: Recent Year Prior Year Revenue $617,989 $4.000 Operating expenses 521,500 500,000 Operating income $96.488 $8,000 a. For Tarrow Corporation, determine the amount of change in millions and the percent of change (round to one decimal place from the prior wear to the recent year for 2. Operating expenses 3. Operating income Amount of Change (in millions) Percent of Change (round to deal (round to 1 decimal place) Increase or D 1. Ravenue 2. Operating expenses 3. Operating income . During the recent year expenses

Answer 1

% change (in millions) Recent year Prior year Change La ba-b 1. Revenue $ 617,988 $ 588,000 $ 29,988 2. Operating expenses $ 521,500 $ 500,000 $ 21,500 3. Operating income $ 96,488 $ 88,000 $ 8,488 5.1 % Increase 4.3 % Increase 9.6 % Increase

$617,988 – $588,000 Percent of change in revenue = -x 100 = 5.1% $588,000 $521,500 - $500,000 Percent of change in operating expenses =- -x 100 = 4.3% $500,000 Percent of change in operating income = $96,488 – $88,000 - X 100 = 9.6% $88,000

During the recent year revenue increased and operating expenses increased. As a result, operating income increased from the prior year.

• Horizontal analysis formula:
• 
  % change = Current year amount – Base year amount x 100 Base year amount
  
• It shows the changes from the base year.
• Base year is the prior year to which the current year is compared with.