The correct answer is b) $100,000.
Vertical analysis is a type of financial statement analysis that shows each item on a statement as a percentage of a base figure. The vertical analysis involves presenting each line item on an income statement as a percentage of net sales and each line item on the balance sheet as a percentage of total assets.
To perform a vertical analysis of this income statement, you would divide each of these income statement line items by $100,000.
Sales = $100,000 / $100,000 = 100%
Cost of goods sold = $46,000 / $100,000 = 46%
Operating expenses = $34,000 / $100,000 = 34%
Interest expense = $15,000 / $100,000 = 15%
Income tax expense = $2,000 / $100,000 = 2%
Net income = $3,000 / $100,000 = 3%
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