3. Question: Financial statement analyses (Total: 25 marks) Karimfour LLC Company wishes to compare itself to a key competitor, Mustafa LLC, but that company is much larger in size than Mustafa. Please refer to the following income statement information for identical periods: Mustafa $8 000 3 370 4 630 Karimfour $46 000 22 000 24 000 Revenues (Net Sales) Cost of sales Gross Profit Selling and general expenses: Sales and marketing expense General and administrative expense Research and development expense Total selling and general expenses 2 100 960 330 $3390 3 950 4 980 4 690 $13 620 Profit before tax Income tax expense Profit/(loss) $1 240 260 $980 $10 380 2 670 $ 7710 a) Should Karimfour use the horizontal or vertical common size statements for such a comparison? Why? (05 marks) b) Prepare suitable statement to compare the two companies (15 marks) c) Comment on the results. Compare Karimfour's performance with key competitor Mustafa (05 marks) 4. Question: Financial statement Concepts (Total: 20 marks) 4.1 Why is the Net Income showing in a company Income Statement not equal to its cash amount?(10 marks) 4.2 Explain the concept of depreciation as it applies to Income Statements (10 marks)