Perform a Vertical Analysis for the Entry "Gross Sales" on the Portion

question 104

Multiple Choice

Perform a vertical analysis for the entry "Gross Sales" on the portion of an income statement shown below. (Round to the nearest tenth) $$\begin{array} { l l } \text { Revenue } & \\\text { Gross Sales } & \$ 290,000 \\\text { Less: Sales returns and Allowances } & 10,000 \\\text { Net Sales } & 280,000 \\\text { Operating Expenses } & \\\text { Salaries and Benefits } & 90,900 \\\text { Rent and Utilities } & 21,300 \\\text { Advertising and Promotions } & 1,250 \\\text { Insurance } & 2,500 \\\text { Miscellaneous Expenses } & 17,500 \\\text { Total Operating Expenses } & \$ 133,450 \\\hline\end{array}$$

• A) 105.9%
• B) 103.6%
• C) 13.1%
• D) 3.6%

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Definitions:

Tax Rate

The rate at which taxes are levied on an individual or a company.

Cost of Capital

The yield a corporation needs to generate from its investment ventures to sustain its market price and appeal to investors.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage.

Short-term Borrowings

Loans or financial obligations that are due for repayment within a short period, typically less than a year.