Horizontal and Vertical Analysis of the Income Statement
The Miami Rockies, a recently transplanted baseball franchise, reported the following income statement and horizontal percentages:
|
1999 Amount |
Percentage Changes |
|
|
(Hundreds of $) |
During 2000 |
|
|
Revenues |
$ 6,500 |
+10% |
|
Operating expenses |
(4,800) |
+8% |
|
Operating income |
$ 1,700 |
? |
|
Income tax (40%) |
(680) |
? |
|
Net income |
$ 1,020 |
? |
Required
a. Complete the “Percentage Changes during 2000” column and determine the dollar amounts reported in the Rockies’ 2000 income statement.
b. Prepare a vertical analysis of the income statements for both 1999 and 2000.
c. Comment on any apparently favorable or unfavorable changes between 1999 and 2000, revealed by your analyses in parts a and b.