Question

Using the following information, prepare a vertical analysis of two years' income statements. Fees Earned is $153,500 for Year 2 and $149,700 for Year 1. Operating expenses are $122,800 for Year 2 and $127,245 for Year 1. Which of the following statements are true?Operating income has decreased as a percentage of revenue.Operating income has increased as a percentage of revenue.None of these choices are correct.Operating expenses have increased as a percentage of revenue

Answer 1

Answer:

Following Statement is true

Operating income has increased as a percentage of revenue.

Vertical Analysis

                                                                        Year 2            Year 1        

Fees Earned                                                  $153,500       $149,700

Operating expenses                                     $122,800       $127,245

Operating Income                                          $30,700        $22,455

Operating Income as percentage of sales       20%               15%

Operating Income as percentage of sales is increased in year 2.

Which of the following statements are true?

Operating income has decreased as a percentage of revenue.

Operating income has increased as a percentage of revenue.

None of these choices are correct.

Operating expenses have increased as a percentage of revenue