Using Vertical Analysis of the Income Statement, a Company's Net

question 93

True/False

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

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Definitions:

Earnings Per Share

A measure of a company's profitability, calculated by dividing the company's net income by the number of its outstanding shares.

Current Liabilities

Obligations or debts that a company must pay within a year.

Debt-To-Equity Ratio

A measure that compares a company's total liabilities to its shareholder equity, used to evaluate financial leverage.

Acid-Test Ratio

A financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets (cash, marketable securities, and receivables), indicating liquidity without relying on inventory sales.