Asked by Abena Opoku on Jun 29, 2024
Verified
Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.
Vertical Analysis
A financial analysis technique that presents each item in a financial statement as a percentage of a base figure.
Net Income
The total profit of a company after all expenses and taxes have been deducted from revenues.
- Analyze financial statements using vertical analysis techniques, including common-sized financial statements.
Verified Answer
ZK
Zybrea KnightJul 03, 2024
Final Answer :
False
Explanation :
The statement is not necessarily true. The net income as a percentage of sales being 15% does not directly correspond to the cost of goods sold being 85%. Other expenses such as operating expenses, interest expenses, and taxes can affect the percentage breakdown of the income statement.
Learning Objectives
- Analyze financial statements using vertical analysis techniques, including common-sized financial statements.
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