The vertical analysis of the income statement of Settler,Inc.is as shown below: The 20% shown for net income in 2019 signifies that net income ________.
A) is 20% of net sales revenues
B) increased by 20% over the previous year
C) is 20% of gross profit
D) equals 20 times of the income before income tax

Question

The vertical analysis of the income statement of Settler,Inc.is as shown below:  The 20% shown for net income in 2019 signifies that net income ________.
A) is 20% of net sales revenues 
B) increased by 20% over the previous year 
C) is 20% of gross profit 
D) equals 20 times of the income before income tax

Quizplus · Accepted Answer

Vertical analysis expresses each item in a financial statement as a percentage of a single base figure. In the income statement, net income is usually expressed as a percentage of net sales revenue. Therefore, the 20% shown for net income in 2019 signifies that net income is 20% of net sales revenues.

The Vertical Analysis of the Income Statement of Settler,Inc