Reimer Company reports the following data: When evaluating the results of operations,what can be said about Reimer Company?
A)Using vertical analysis,the company's profitability declined in 2014.
B)Using horizontal analysis,the company's profitability declined in 2014.
C)Using vertical analysis,the company's profitability declined in 2015.
D)Using horizontal analysis,the company's profitability declined in 2015.

Question

Reimer Company reports the following data:  When evaluating the results of operations,what can be said about Reimer Company?
A)Using vertical analysis,the company's profitability declined in 2014. 
B)Using horizontal analysis,the company's profitability declined in 2014. 
C)Using vertical analysis,the company's profitability declined in 2015. 
D)Using horizontal analysis,the company's profitability declined in 2015.

Quizplus · Accepted Answer

Vertical analysis involves comparing different items of the financial statement to a common base within single year. Looking at the given data, we can see that the company's profitability declined in 2015 as compared to 2014, i.e. net income decreased from 18% of total revenue in 2014 to 16.5% in 2015. Option A and B are incorrect because there is no evidence of decline in profitability based on vertical or horizontal analysis for 2014. Option D is incorrect because there is no information given about profitability declining in 2015 based on horizontal analysis.

Reimer Company Reports the Following Data: When Evaluating the Results