In performing a vertical analysis, a 10% increase in net sales combined with an 8% increase in total expenses will cause profit to
A) increase by 10%.
B) decrease by 10%.
C) increase by 2%.
D) decrease by 2%.

Question

Quizplus · Accepted Answer

In a vertical analysis, an increase in net sales while expenses also increase but at a lower rate (10% increase in sales vs. 8% increase in expenses) means that the profit margin will increase. The difference in the percentage increase (10% - 8% = 2%) suggests that profit, as a percentage of sales, will increase by 2%.

In Performing a Vertical Analysis, a 10% Increase in Net