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 2007 net income before income tax and income tax expense?
A) Vertical analysis would report net income before income tax as 17.86% and income tax expense as 4.93% of net sales revenue.
B) Vertical analysis would report a 58.18% increase in both net income before income tax and income tax expense.
C) Vertical analysis would report a $32,000 increase in both net income before income tax and income tax expense.
D) None of the above is correct.

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 2007 net income before income tax and income tax expense?
A) Vertical analysis would report net income before income tax as 17.86% and income tax expense as 4.93% of net sales revenue. 
B) Vertical analysis would report a 58.18% increase in both net income before income tax and income tax expense. 
C) Vertical analysis would report a $32,000 increase in both net income before income tax and income tax expense. 
D) None of the above is correct.

Quizplus · Accepted Answer

Vertical analysis reports each amount on a financial statement as a percentage of another item. For example, it would report net income before income tax and income tax expense as a percentage of net sales revenue, as described in option A.

The Following Is a Summary of Information Presented on the Income