Oglethorpe Company reports the following information from the vertical analysis of their income statement:
Net income:
4.2 % in 2014
3.9% in 2013
Which of the following statements could be logically concluded from the above data?
A) The company made a higher gross profit in 2014 than in 2013.
B) The company made higher net income in 2014 than in 2013.
C) The company has improved the profit they make per dollar of sales in 2014.
D) The company's total net income increased by 0.3% in 2014.

Question

Quizplus · Accepted Answer

The vertical analysis shows the percentage of different items on the income statement relative to net sales. Since the net income percentage increased from 3.9% to 4.2% from 2013 to 2014, it can be concluded that the company has improved their profit margin, which means they have improved the profit they make per dollar of sales. The other options cannot be logically concluded from this data alone.

Oglethorpe Company Reports the Following Information from the Vertical Analysis