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.

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RETAIL CORPORATION Horizontal Income Statement Year Ended January 30 2012 140.0% 148.3% 127.5% 171.4% 93.3% 40.0% 240.0% 140.0% 160.0% 135.2% 2011 111.0% 113 Revenue Cost of goods sold Gross profit Operating expenses Profit from operations Interest expense Other revenue Profit before income tax Income tax expense Profit .3% 107.5% 133.1% 87.6% 60.0% 140.0% 110.8% 116.0% 109.5% 2010 114.0% 116.7% 110.0% 126.9% 96.9% 80.0% 200.0% 13.8% 124.0% 111.4% 2009 100.0% 100.0% 100.0% 100.0% 1 00.0% 100.0% 100.0% 100.0% 100.0% 100.0% 1 RETAIL CORPORATION Vertical Income Statement Year Ended January 30 Revenue Cost of goods sold Gross profit Operating expenses Profit from operations Interest expense Other revenue Profit before income tax Income tax expense Profit 2012 100.0% 63.6% 36.4% 21.4% 15.0% (29%) 0.9% 13.0% 2.9% 10.1% 2011 100.0% 61.2% 38.8% 21.0% 17.8% (5.4%) 0.6% 13.0% 2.6% 10.4% 2010 00.0% 61.4% 38.6% 19.5% 19.1% (70%) 0.9% 13.0% 2.7% 10.3% 2009 100.0% 60.0% 40.0% 17.5% 22.5% (10.0%) 0.5% 13.0% 2.5% 10.5%