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 over the four-year period?
(b) 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.
(c) Identify any other key financial statement components that have changed over the four year period for the company.
(d) Identify any additional information that might be helpful to you in your analysis of this company over the four-year period.

Transcribed Image Text:

RETAIL CORPORATION Year Ended January 31 Cost of goods sold Operating expenses Profit from operations Interest expense Profit before income tax Income tax expense RETAIL CORPORATION Vertical Income Statement Cost of goods sold Profit from operations Interest expense Other revenue Profit before income tax Income tax expense