Question

Income statements for Finch Company for 2018 and 2019 follow:

FINCH COMPANY Income Statements
	2019				2018
Sales	$	200,400			$	180,400
Cost of goods sold		142,200				120,200
Selling expenses		21,700				19,700
Administrative expenses		13,000				15,000
Interest expense		3,500				5,500
Total expenses	$	180,400			$	160,400
Income before taxes		20,000				20,000
Income taxes expense		6,000				3,900
Net income	$	14,000			$	16,100

Required

1. Perform a horizontal analysis, showing the percentage change in each income statement component between 2018 and 2019.

2. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year.

FINCH COMPANY
Horizontal Analysis of Income Statements
	Percentage Change over 2018
Sales		%
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before taxes
Income taxes expense
Net income (loss)		%

FINCH COMPANY
Vertical Analysis of Income Statements
	Percentage of Sales 2019		Percentage of Sales 2018
Sales		%		%
Cost of goods sold
Selling expenses
Administrative expenses
Interest expense
Total expenses
Income before taxes
Income taxes expense
Net income

Answer 1