Question

In examining Luke Company's current-period income statement, you notice that Research and Development expenses are 62% of sales revenue. Luke has most likely provided a.a horizontal analysis. b.a horizontal analysis using sales as the base. c.a vertical analysis using sales as the base. d.a vertical analysis using net income as the base. e.None of these choices are correct.

Answer 1

C) A vertical analysis using sales as the base

Step-by-step explanation:

Answer 2

The correct answer is the option C: a vertical analysis using sales as the base.

Step-by-step explanation:

To begin with, the concept known as ''vertical analysis'' is a tool or method used in the financial statements whose main purpose is to analize the changes that were made in the financial statement being analized and it uses a base figure within the statement in order to list each item inside the paper as a percentage of the base used.

To sum up, in this case, Luke has most likely provided a vertical analysis using sales as the base in order to determinate the percentage of the other items according to the sales.