If Rick's sales decreased from $90,000 (year 1)to $45,000 (year 2)and its cost of goods sold decreased from $30,000 (year 1)to $20,000 (year 2),then vertical analysis based on sales would show the following decreases for cost of goods sold for the two periods:
A)33.33% and 44.44%.
B)44.44% and 33.33%.
C)300% and 225%.
D)None of the above.

Question

Quizplus · Accepted Answer

Vertical analysis involves expressing each item in a financial statement as a percentage of a base item. For year 1, cost of goods sold as a percentage of sales is ($30,000/$90,000) * 100 = 33.33%. For year 2, it is ($20,000/$45,000) * 100 = 44.44%.

If Rick's Sales Decreased from $90,000 (Year 1)to $45,000 (Year