The following is a summary of information presented on the income statement of HR Flowers for December 31, 2007.

- What would vertical analysis report with respect to the relationship between 2007 net sales revenue and cost of goods sold?
A) Vertical analysis would report that cost of goods sold was too high as a percentage of net sales revenue.
B) Vertical analysis would report that cost of goods sold was 67.76% of net sales revenue.
C) Vertical analysis would report that cost of goods sold increased more than net sales revenue.
D) Vertical analysis would report that cost of goods sold was too low as a percentage of net sales revenue.

Question

The following is a summary of information presented on the income statement of HR Flowers for December 31, 2007.

- What would vertical analysis report with respect to the relationship between 2007 net sales revenue and cost of goods sold?
A) Vertical analysis would report that cost of goods sold was too high as a percentage of net sales revenue. 
B) Vertical analysis would report that cost of goods sold was 67.76% of net sales revenue. 
C) Vertical analysis would report that cost of goods sold increased more than net sales revenue. 
D) Vertical analysis would report that cost of goods sold was too low as a percentage of net sales revenue.

Quizplus · Accepted Answer

Vertical analysis expresses each item in a financial statement as a percentage of a base amount. In this case, it would express cost of goods sold as a percentage of net sales revenue, without making judgments about whether the cost is too high or too low or comparing its growth to net sales revenue.

The Following Is a Summary of Information Presented on the Income