Vertical Analysis of an Income Statement
A condensed income statement for Simultech Corporation and a partially completed vertical
analysis are presented below.
SIMULTECH CORPORATION Income Statement (summarized) (in millions of U.S. dollars) | ||||
| For the Years Ended | |||
| January 31, 2010 | January 31, 2009 | ||
Sales Revenues | $2,062 | 100% | $2,200 | 100% |
Cost of Goods Sold | 1,637 | 79 | 1,721 | (d) |
Selling, General, and Administrative Expenses | 333 | (a) | 346 | 16 |
Other Operating Expenses | 53 | 3 | 12 | 1 |
Interest Expense | 22 | (b) | 26 | 1 |
Income before Income Tax Expense | 17 | 1 | 95 | (e) |
Income Tax Expense | 6 | 0 | 33 | 1 |
Net Income | $ 11 | (c)% | $ 62 | (f)% |
Required:
1. Complete the vertical analysis by computing each line item (a)–(f) as a percentage of sales revenues. Round to the nearest whole percentage.
2. Does Simultech’s Cost of Goods Sold for the year ended January 31, 2010, as a percentage of revenues, represent better or worse performance as compared to that for the year ended January 31, 2009?
3.Do the percentages that you calculated in 1 (c) and (f) indicate whether Simultech’s net profit margin has changed over the two years?
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