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

The vertical analysis shows that net income in 2019 is 20% of the net sales revenue. This means that for every $1 of sales revenue, $0.20 is earned as net income. Option A correctly interprets the percentage shown in the analysis. Option B is incorrect as the analysis does not provide any information about the percentage increase in net income over the previous year. Option C is incorrect as net income is not a percentage of gross profit. Option D is also incorrect as there is no information provided to support this calculation.

The Vertical Analysis of the Income Statement of Settler,Inc