Selected data from the financial statements are provided below:

-Refer to Rags to Riches. Which of the following would result from a vertical analysis of the company's income statement?
A)The accounts receivable turnover ratio is 7.76 in 2020.
B)Gross profit is 57.9% of net sales for 2020.
C)Cost of goods sold decreased $50,000 or 23.8% during 2020.
D)Net sales is 84.4% of total assets for 2020.

Question

Selected data from the financial statements are provided below:
 
-Refer to Rags to Riches. Which of the following would result from a vertical analysis of the company's income statement?
A)The accounts receivable turnover ratio is 7.76 in 2020. 
B)Gross profit is 57.9% of net sales for 2020. 
C)Cost of goods sold decreased $50,000 or 23.8% during 2020. 
D)Net sales is 84.4% of total assets for 2020.

Quizplus · Accepted Answer

Vertical analysis of the income statement would express each line item as a percentage of net sales. Therefore, gross profit as a percentage of net sales can be determined. None of the other choices listed would result from a vertical analysis of the income statement.

Selected Data from the Financial Statements Are Provided Below