Question

A condensed income statement for Simultech Corporation and a partially completed vertical analysis are presented below. Required: 1. Complete the vertical analysis by computing each missing line item as a percentage of sales revenues. (Round your answers to the nearest whole percent.) SIMULTECH CORPORATION Income Statement (summarized) in millions of U.S. dollars) Current Year Previous Year S 2.075 100% S 2.250 1,741 366 14 24 Sales Revenues 1001% Cost of Goods Sold 1,617 78 Selling, General, and Administrative Expenses353 16 Other Operating Expenses Interest Expense Income before income taxes income Tax Expense Net Income 57 26 22105 34 2 14 96 s 71 6 2. Does Simultech's Cost of Goods sold for the current year, as a percentage of revenues. represent better or worse performance as compared to that for the previous year ? Better e Worse 3. Has Simultech's net profit margin has increased or degreased, over the two years? O Increased Decreased

Answer 1

		Simultech Corporation
		Vertical Analysis of Income Statement		(Amount in millions of US dollars)
`		Current Year	Percent	Working	Previous year	Percent	Working
1	Sales Revenue=(A)	$                     2,075.00	100.00%	($2075/$2075)*100	$                                    2,250.00	100.00%	($2250/$2250)*100
	Cost of goods sold=(B)	$                     1,617.00	77.93%	($1617/$2075)*100	$                                    1,741.00	77.38%	($1741/$2250)*100
	Gross Profit=(C )=(A)-(B)	$                         458.00	22.07%	($458/$2075)*100	509.00	22.62%	($509/$2250)*!00
	Selling,General, Administerative expenses,=(D )	$                         353.00	17.01%	($353/$2075)*100	$                                        366.00	16.27%	($366/$2250)*100
	Other Operating Expenses=(E )	$                           57.00	2.75%	($57/$2075)*100	$                                          14.00	0.62%	($14/$2250)*100
	Income before Interest and Tax=(F )=(C )-(D )-(E)	$                           48.00	2.31%	($48/$2075)*100	$                                        129.00	5.73%	($129/$2250)*100
	Interest Expenses=(G)	$                           26.00	1.25%	($26/$2075)*100	$                                          24.00	1.07%	($24/$2250)*100
	Income before Income Taxes=(H)=(F)-(G)	$                           22.00	1.06%	($22/$2075)*100	$                                        105.00	4.67%	($105/$2250)*100
	Income Tax Expense=(I)	$                              8.00	0.39%	($8/$2075)*100	$                                          34.00	1.51%	($34/$2250)*100
	Net Income(H)-(I)	$                           14.00	0.67%	($14/$2075)*100	$                                          71.00	3.16%	($71/$2250)*100
2	Cost of goods sold is increased in current year in % as compared to previous year.
	It is worse because of increase in COSt of goods sold , Gross Profit will be reduced as compared to previous year.	Worse
3)	Net Profit is decreased as compared to Previous year, due to increase in expenses and reduced of sale as compared to previous year.	Decreased