The vertical analysis statement of Peterson, Inc is as shown below

Question

Peterson, Inc
Comparative Income Statement
Years Ended December 31, 2017 and 2016
(In millions) 2017 Percent of Total 2016 Percent of Total
Net Sales $6,355 100.0% $4,920 100.0%
Cost of Goods Sold 3,370 53.0 2,200 44.7
Gross Profit 2,985 47.0 2,720 55.3
Operating Expenses:
Selling Expenses 675 10.6 580 11.8
Administrative expenses 410 6.5 425 8.6
Total Operating Expenses 1,085 17.1 1,005 20.4
Operating Income 1,900 29.9 1,715 34.9
Other Revenues and (Expenses):
Interest Revenue 0 0 0 0.0
Interest Expense (400 ) (6.3 ) (695 ) (14.1 )
Total Revenues and (Expenses) (400 ) (6.3 ) (695 ) (14.1 )
Income Before Income Taxes 1,500 23.6 1,020 20.7
Income Tax Expense 230 3.6 210 4.3
Net Income $1,270 20.0% $810 16.5%

The 20% shown for net income in 2017 signifies that net income ________.
A) is 20% of net sales revenues
B) increased by 20% over the previous year
C) is 20% of gross profit
D) equals 20 times of the income before income tax

Answer 1

A