Problem 1:
Vertical analysis (common-size) percentages for Vallejo Company’s sales, cost of goods sold, and expenses are listed here.
Vertical Analysis 2012 2011 2010
Sales 100% 100% 100%
Cost of goods sold 61.2 63.9 66.9
Expenses 24.0 27.9 28.9
Did Vallejo’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.
Problem 2: Horizontal analysis (trend analysis) percentages for Spartan Company’s sales, cost of goods sold, and expenses are listed here.
Horizontal Analysis 2012 2011 2010
Sales 96.2% 104.8% 100.0%
Cost of goods sold 101.0 98.0 100.0
Expenses 105.6 95.4 100.0
Explain whether Spartan’s net income increased, decreased, or remained unchanged over the 3-year period.