Question: In a financial statement analysis, you are examining the common-size income statements for the XYZ Metrical Company for the past 5 years and have noticed

In a financial statement analysis, you are examining the common-size income statements for the XYZ Metrical Company for the past 5 years and have noticed that the cost of goods as a percentage of sales has been increasing steadily. At the same time, EBIT as a percentage of sales has been decreasing. What might account for the trends in these ratios? What actions might managers take to improve these ratios?

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