The vertical analysis of the income statement of Bates,Inc.is as shown below: The figure 47.0% shown for gross profit in 2019 signifies that the gross profit is ________.
A)equal to 47.0% of net income
B)increased by 47.0% over the previous year
C)47.0% of net sales revenue
D)47.0% of cost of goods sold

Question

The vertical analysis of the income statement of Bates,Inc.is as shown below:  The figure 47.0% shown for gross profit in 2019 signifies that the gross profit is ________.
A)equal to 47.0% of net income 
B)increased by 47.0% over the previous year 
C)47.0% of net sales revenue 
D)47.0% of cost of goods sold

Quizplus · Accepted Answer

In a vertical analysis, each line item is expressed as a percentage of a base figure, which in this case is net sales revenue. Therefore, the figure 47.0% for gross profit means that it is 47.0% of the net sales revenue for the year, and not any of the other options provided.

The Vertical Analysis of the Income Statement of Bates,Inc