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

question 45

True/False

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

---

Definitions:

Cochran and Colleagues

A group of researchers known for their contributions to a specific field or study, though the context of their work would determine their specific domain of expertise.

Eyewitnesses

Individuals who have directly observed an event and can provide a first-hand account or testimony of that event.

Reliability

The degree to which an assessment tool produces stable and consistent results over time.

Eyewitness Testimony

evidence provided by individuals who were present at the scene of a crime, describing what they observed.