You are considering buying a franchise operation in The Tree Pruning Company. One of your friends in a nearby city has had one for two years. She shared her results, below:

Required:
(a) Prepare a horizontal and vertical analysis on the income statement.
(b) Should you buy a franchise?

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The Tree Pruning Company Income Statements for the year ended December 31 Sales Less: Cost of goods sold Gross profit Less: Operating costs Earnings before interest and taxes (EBITY Less: Interest expense Earnings before taxes Less: Income tax expense Net income 2010 $ 75,000 37,000 38,000 28000 10,000 3,000 7,000 2,800 4,200 2009 S 62,000 0,000 32,000 24,000 8,000 5,000 3,000 1.200 $ 1,800