XY Corporation The Income Statement —Horizontal Analysis For The

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XY Corporation The Income Statement —Horizontal Analysis For The Powered By Docstoc
					        Vertical Analysis
      (structural Analysis)
• The vertical analysis is the study on the
  relationship of each item to the total
  figure in a single statement. Analysts
  define the total figure as the base, and set
  it equal to 100 percent, in the balance
  sheet that is the total assets or the total
  liabilities and stockholders’ equity. In
  income statement that is the sales.
      Vertical Analysis

• The computation of each item’s
  percentage is as follows:
• item percentage=
• (Item amount∕Total amount)100%
        XY Corporation The Income Statement
                 —vertical Analysis
          For The Year Ended Dec. 31, 2008 and 2007

                                2008                   2007
                       Amount    Percentage   Amount     percentage
Sales                   14680      100.00      14550       100.00
Cost of goods sold      6608       45.01       7980           54.58
Gross Profit            8072       54.99       6570           44.15
Operating expenses      5922       40.34       4862           33.42
Income from             2150       14.65       1709           11.75
Operation Before
Income Taxes
Income taxes expense    425            2.90    308            2.12
Net income              1725       11.75       1400           9.62
  Vertical Analysis: the corporation has
improved its profitability during 2004, the
percentage of cost of goods sold declined , and
the percentage of earnings before income taxes
and the net income raised, but the percentage of
operating expense increase. If the corporation
wants to increase its profit, it must reduce
operating expense.

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