A horizontal and vertical analysis of the income statement for a retail company selling a wide variety of general merchandise is shown below.

Instructions
(a) How effectively has the company controlled its cost of goods sold and operating expenses over the four-year period?
(b) Identify any other income statement components that have significantly changed over the four-year period for the company.
(c) Identify any additional information that might be helpful to you in your analysis of this company over the four-year period.
Taking It Further
In a vertical analysis, the company's profit before income tax has remained unchanged at 13% of revenue over the four-year period. Yet, in a horizontal analysis, profit before income tax has grown 40% over that period of time. Explain how this is possible?

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RETAIL CORPORATION Horizontal Income Statement Year Ended January 31 Cost of goods sold Operating expenses Profit from operations Other revenues and expenses Interest expense Other revenue Profit before income tax Income tax expense RETAIL CORPORATION Vertical Income Statement Year Ended January 31 2014 100.0% 63.6% 36.4% 21.4% 15.0% 2013 100.0% 61.2% 38.8% 21 .0% 17.8% 2012 Net sales Cost of goods sold Gross proft Operating expenses Profit from operations Other revenues and expenses 100.0% 61.4% 38.6% 19.5% 19.1% 2011 100.0% 60.0% 40.0% 17.5% 22.5% (2.9)% 0.9% 13.0% 2.9% 10.1% (5.4)% 0.6% 13.0% 26% 10.4% (7.0)% 0.9% 13.0% 2.7% 10.3% (10.0)% 0.5% 13.0% 2.5% 10.5% Interest expense Other revenue Profit before income tax Income tax expense Profit