Question

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​ ________.

Answer 1

Answer:

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.