The vertical analysis of the income statement of Settler, Inc. is as shown below: The 20% shown for net income in 2019 signifies that net income ________.
A) is 20% of net sales revenues
B) increased by 20% over the previous year
C) is 20% of gross profit
D) equals 20 times of the income before income tax

Question

The vertical analysis of the income statement of Settler, Inc. is as shown below:  The 20% shown for net income in 2019 signifies that net income ________.
A) is 20% of net sales revenues 
B) increased by 20% over the previous year 
C) is 20% of gross profit 
D) equals 20 times of the income before income tax

Quizplus · Accepted Answer

Vertical analysis expresses each item in the financial statement as a percentage of the base amount. In the given income statement, net income is shown as 20% of net sales revenues. Therefore, the correct answer is A, which states that net income is 20% of net sales revenues.

The Vertical Analysis of the Income Statement of Settler, Inc