Ch.l 7 Se handout. Perform a vertical analysis for both 2017 and 2018 for Sanfie
ID: 2509763 • Letter: C
Question
Ch.l 7 Se handout. Perform a vertical analysis for both 2017 and 2018 for Sanfield's Income Statement Show only account titles and percentages, do not reproduce data. Did the company's profitability strengthen or deteriorate from 2017 to 2018? What was the major cause of change? Formatting and presentation will be assessed (8pts) See handout. Perform a horizontal analysis for Sanfield's Balance Sheet 2017&2018. Include accounts titles, amount change & percentage change columns, but do not reproduce the data What changes happened within the asset section from 2017 to 2018? Is there any significance in these changes? Formatting and presentation will be assessed (8pts) 2.Explanation / Answer
1.
There is an increase in the net margin (14.07%) in 2018 as compared to 11.63% in 2017. This seems to be due to the following two reasons.
a. Decrease in the interest expense by 1.06%
b. Decrease in the income tax rate . In 2017 the income tax rate is 30.56% (22,000/ 72,000) , whereas in 2018 it has come down to 21.69%., which has resuleted in the income tax to sales % coming down from 5.12% to 3.90%.
2.
SANEFIELD INC Comparative Income Statements for the years ended Dec.31, 2018 and Dec.31, 2017 2018 2017 % % Net Sales Revenue 100.00% 100.00% Cost of Goods Sold 51.08% 49.53% Gross Profit 48.92% 50.47% Operating Expenses 29.22% 30.93% Income from Operations 19.70% 19.53% Interest Expense 1.73% 2.79% Income Before Income Tax 17.97% 16.74% Income Tax Expense 3.90% 5.12% Net Income 14.07% 11.63%