Prepare a horizontal analysis of the income statement data for Monty Corp., usin
ID: 2603362 • Letter: P
Question
Prepare a horizontal analysis of the income statement data for Monty Corp., using 2016 as a base.
Increase or (Decrease) During 2017
2017
2016
Amount
Percentage
Net sales
$628,300
$531,300
%
Cost of goods sold
456,400
409,900
%
Gross Profit
171,900
121,400
%
Operating expenses
71,400
41,100
%
Net income
$ 100,500
$ 80,300
Prepare a vertical analysis of the income statement data for Monty Corp. for both years.
2017
2016
$
Percent
$
Percent
Net sales
$628,300
%
$531,300
%
Cost of goods sold
456,400
%
409,900
%
Gross Profit
171,900
%
121,400
%
Operating expenses
71,400
%
41,100
%
Net income
$ 100,500
%
$ 80,300
%
MONTY CORP.Comparative Income Statement
December 31For the Years Ended December 31For the Month Ended December 31EAT_1438687245976_1_2705563206787363
Increase or (Decrease) During 2017
2017
2016
Amount
Percentage
Net sales
$628,300
$531,300
$%
Cost of goods sold
456,400
409,900
%
Gross Profit
171,900
121,400
%
Operating expenses
71,400
41,100
%
Net income
$ 100,500
$ 80,300
$Explanation / Answer
Part 1
Horizontal analysis is a financial analysis technique that shows changes in the amount of corresponding financial staements over a period of time. It useful for trend analysis.Statement of two or more period can be used in horizontal analysis. The earliest period will be taken as base year and all later period are compared with items on the statement of base period.
The amount will be given as Increase or (Decrease) in data when compared to previous year 2016.
Percentage Column is rounded of upto two decimal places
The formula to calulate percentage change is Change/ Base. As per the solution the base year will be previous year in our example 2016. So change is increase or decrease in amount while comparing from previous year.
Part 2
A vertical analysis is used to show the the relative sizes of the different accounts on a financial statement.
For example, when a vertical analysis is done on an income statement, it will show the top line sales number as 100% and every other account will show as a percentage of the total sales number.
Hope it will help.
Particulars 2017 2016 Amount Percentage Net Sales $628,300 $531,300 $97,000 18.26% Cost of Goods Sold $456,400 $409,900 $46,500 11.34% Gross Profit $171,900 $121,400 $50,500 41.60% Operating expenses $71,400 $41,100 $30,300 73.72% Net Income $100,500 $80,300 $20,200 25.15%