During the years 2013 through 2015,Powers,Inc.,reported the following amounts of net income (dollars in thousands): Relative to the prior year,the percentage change in net income:
A)Was the same in 2014 and 2015.
B)Was larger in 2015 than in 2014.
C)Was smaller in 2015 than in 2014.
D)Cannot be determined without knowing how many shares of stock were outstanding.

Question

During the years 2013 through 2015,Powers,Inc.,reported the following amounts of net income (dollars in thousands):  Relative to the prior year,the percentage change in net income:
A)Was the same in 2014 and 2015. 
B)Was larger in 2015 than in 2014. 
C)Was smaller in 2015 than in 2014. 
D)Cannot be determined without knowing how many shares of stock were outstanding.

Quizplus · Accepted Answer

To calculate the percentage change in net income, we need to divide the difference between the current year's net income and the prior year's net income by the prior year's net income and then multiply the result by 100.

For example, to calculate the percentage change in net income from 2013 to 2014:
[(2014 net income - 2013 net income) / 2013 net income] x 100

Using this formula, we can calculate the percentage changes in net income as follows:

- From 2013 to 2014: [(590 - 520) / 520] x 100 = 13.46%
- From 2014 to 2015: [(670 - 590) / 590] x 100 = 13.56%

We can see that the percentage change in net income was slightly larger in 2015 than in 2014. Therefore, the best choice is C, "Was smaller in 2015 than in 2014." The number of shares outstanding is not needed to determine the percentage change in net income.

During the Years 2013 Through 2015,Powers,Inc