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

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