Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 1

Vertical analysis of income statement
For 2016, Fielder Industries Inc. initiated a sales promotion campaign that included the expenditure of an additional $40,000 for advertising. At the end of the year, Leif Grando, the president, is presented with the following condensed comparative income statement:

Instructions
1. Prepare a comparative income statement for the two-year period, presenting an analysis of each item in relationship to sales for each of the years. Round to one decimal place.
2. To the extent the data permit, comment on the significant relationships revealed by the vertical analysis prepared in (1).