The vertical analysis of the income statement of bates, inc. is as shown below: bates, inc. comparative income statement years ended december 31, 2019 and 2018 bates, inc. comparative income statement years ended december 31, 2019 and 2018 (in millions) 2019 percent of total 2018 percent of total net sales $6,355 100.0% $4,920 100.0% cost of goods sold 3,370 53.0 2,200 44.7 gross profit 2,985 47.0 2,720 55.3 operating expenses: selling expenses 675 10.6 580 11.8 administrative expenses 410 6.5 425 8.6 total operating expenses 1,085 17.1 1,005 20.4 operating income 1,900 29.9 1,715 34.9 other income and (expenses): interest expense (400) (6.3) (695) (14.1) total other income and (expenses) (400) (6.3) (695) (14.1) income before income taxes 1,500 23.6 1,020 20.7 income tax expense 230 3.6 210 4.3 net income $1,270 20.0% $810 16.5% the figure 47.0% shown for gross profit in 2019 signifies that the gross profit is

The figure 47.0% shown for gross profit in 2019 signifies that the gross profit is 47.0% of net sales revenue.

Explanation:

Vertical analysis: The vertical analysis is that analysis which shows the percentage between two items .

Like in income statement, all items should be percentage of net sales. For balance sheet, all items should be percentage of total assets.

Comparative Income Statement: This statement shows the comparison between two years so that proper analysis can be made. This statement is very important to check the increment or decremented ratios for these two years.

The gross profit is 47% which comes from dividing net sales revenue by gross profit

= Gross profit ÷ Sales revenue

= 2,985 ÷ 6,355 × 100

= 46.97%

So, the figure 47.0% shown for gross profit in 2019 signifies that the gross profit is 47.0% of net sales revenue.

1. c

2. b

3. a

4. c

5. a

6. b

7. c

8. c

9.b

10. d

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