Arlington Company Has Prepared the Following Common-Size Income Statement to Compare

question 97

True/False

Arlington Company has prepared the following common-size income statement to compare its performance with industry averages:
$$\begin{array} { | l | r | r | } \hline & \text { Arlington Co. } & \text { Industry } \\\hline \text { Revenues } & 100.0 \% & 100.0 \% \\\hline \text { Cost of sales } & 43.8 \% & 39.7 \% \\\hline \text { Gross profit } & 56.2 \% & 60.3 \% \\\hline \text { Selling and general expenses: } & & \\\hline \text { Sales and marketing expense } & 18.1 \% & 21.4 \% \\\hline \text { General and administrative expense } & 12.0 \% & 14.2 \% \\\hline \text { Research and development expense } & 4.1 \% & 4.0 \% \\\hline \text { Total selling and general expenses } & 34.2 \% & 39.6 \% \\\hline & & \\\hline \text { Profit before tax } & 22.0 \% & 20.7 \% \\\hline \text { Income taxexpense } & 4.4 \% & 4.2 \% \\\hline \text { Profit (loss) } & 17.6 \% & 16.5 \% \\\hline\end{array}$$ Based on the above data,an analyst could conclude that Arlington achieves better results than the industry average by controlling its selling and general expenses more effectively.

---

Definitions:

Carbon Monoxide Poisoning

A potentially lethal condition caused by inhalation of carbon monoxide gas, which prevents oxygen from binding to hemoglobin in the blood.

Oxyhemoglobin

A complex formed when oxygen binds to the hemoglobin in red blood cells.

Hyperbaric Oxygen Chamber

A pressurized chamber in which a patient breathes 100% oxygen to enhance the body's natural healing processes.

Oxygen Pressure

The partial pressure exerted by oxygen in a mixture of gases or in a liquid, crucial for respiratory processes.