Because the income statement shows aggregated amounts such as sales, gross profit, and net income, a change in product mix can distort ratios and comparisons of financial statements.

Question

Quizplus · Accepted Answer

Most products have unique profit margins and their mix influences the firm's profit margin. In comparing two years of financial statements for a company with only a few products, high sales of a low profit-margin product can hide the effect of declining sales of a primary, high profit-margin product.

Because the Income Statement Shows Aggregated Amounts Such as Sales