Osgood Company provided the following income statement for Year 1 and Year 2:
Required:(a) Perform vertical analysis on Osgood's income statements for Year 1 and Year 2. Round your answer to one decimal place (i.e. 22.4%)(b) Comment on the results, comparing Year 1 to Year 2.
What will be an ideal response?
Answers will vary
(a)
(b) The most important difference between Year 1 and Year 2 is that cost of goods sold was 65.6% of sales in Year 1 and 70.9% in Year 2. Another difference is that selling and administrative expenses were 9.4% of sales in Year 1 and 11.8% of sales in Year 2. As a result, net income was 16.2% of sales in Year 1, and it fell to 11.5% in Year 2.
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