Answers – Vertical and Horisontal analyis

1. Vertical analysis (common-size) percentages for Vallejo Company’s sales, cost of goods sold, and expenses are listed here.

Vertical Analysis	2012	2011	2010
Sales	100%	100%	100%
Cost of goods sold	60.5%	63.3%	65.4%
Expenses	25.0%	27.5%	28.2%

Did Vallejo’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer. (min 150 words)

2. Horizontal analysis (trend analysis) percentages for Spartan Company’s sales, cost of goods sold, and expenses are listed here.

Horizontal Analysis	2012	2011	2010
Sales	96.2%	104.8%	100.0%
Cost of goods sold	101.0%	98.0%	100.0%
Expenses	105.6%	95.4%	100.0%

Explain whether Spartan’s net income increased, decreased, or remained unchanged over the 3-year period. (min 150 words)

 

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