Charles Gibson Financial Statement Analysis Chapter 5

PROBLEMS

1. Comparative income statements for 2006 and 2005 follow. FROM GIBSON, CHAPTER 5

| |2006 |2005 |
|Sales |$9,434,000 |$7,862,000 |
|Cost of Sales | 7,075,400 | 5,660,640 |
|Gross Profit | $2,358,600 | $2,201,360 |
|Operating Expenses | 1,367,690 | 1,365,060 |
|Operating Income |$ 990,910 |$ 836,300 |
|Interest Expense | 157,500 | 126,000 |
|Earnings Before Tax |$ 833,410 |$ 710,300 |
|Income Taxes | 400,000 | 317,200 |
|Net Income |$ 433,410 |$ 393,100 |

Required:
|a. |Prepare a vertical common-size analysis of this statement for each year, using sales as the base. |
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| | |
| |2006 |
| |2005 |
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| |Sales