The Following Is a Summary of Information Presented on the Financial

question 51

Essay

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014.
What would horizontal analysis report with respect to net income before income tax expense and net income?
A)That both net income before income tax expense and net income are 45.45% of net sales revenue
B)A $25,000 increase in both net income before income tax expense and net income
C)A 45.45% increase in both net income before income tax expense and net income
D)A 145% increase in both net income before income tax expense and net income

• A)That both net income before income tax expense and net income are 45.45% of net sales revenue
• B)A $25,000 increase in both net income before income tax expense and net income
• C)A 45.45% increase in both net income before income tax expense and net income
• D)A 145% increase in both net income before income tax expense and net income

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Definitions:

Yield

The income return on an investment, such as the interest or dividends received, expressed usually as a percentage of the investment's cost or current market value.

Restrictive Covenants

Clauses in contracts that impose limitations or conditions on the actions of parties, commonly found in lending agreements to protect the lender.

Indenture

A formal legal agreement, contract, or document, especially one relating to a loan or bond issue.

Debenture

An unsecured bond.