The Galloway Corporation Data for the Current Year -What Would a Horizontal Analysis Report with Respect to Selling/general

question 99

Multiple Choice

The Galloway Corporation data for the current year: $\begin{array}{|l|l|l|}\hline \text { Account } & \text { Current year } & \text { Prior year } \\\hline \text { Current assets } & \$ 46,200 & \$ 42,000 \\\hline \text { A/R } & \$ 69,000 & \$ 60,000 \\\hline \text { Mdse. Inventory } & \$ 67,500 & \$ 50,000 \\\hline \text { Current liabilities } & \$ 46,200 & \$ 33,000 \\\hline \text { Long-term liabilities } & \$ 26,600 & \$ 28,000 \\\hline \text { Common stock (5,000 shares) } & \$ 42,000 & \$ 35,000 \\\hline \text { Retained earnings } & \$ 67,900 & \$ 56,000 \\\hline \text { Net sales revenue } & \$ 625,000 & \$ 500,000 \\\hline \text { COGS } & \$ 520,000 & \$ 400,000 \\\hline \text { Gross Profit } & \$ 105,000 & \$ 100,000 \\\hline \text { Selling/General expenses } & \$ 45,000 & \$ 50,000 \\\hline \text { Net income before taxes } & \$ 60,000 & \$ 50,000 \\\hline \text { Income tax expense } & \$ 16,500 & \$ 15,000 \\\hline \text { Net Income } & \$ 43,500 & \$ 35,000\\\hline\end{array}$



-What would a horizontal analysis report with respect to selling/general expenses?

• A)An 11.11% increase
• B)Selling/general expenses as 7.20% of net sales revenue
• C)A 10% decrease
• D)A current ratio of 1.00

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Definitions:

Debt

An amount of money borrowed by one party from another, to be repaid typically with interest.

Cost of Equity

The return a firm theoretically pays to its equity investors to compensate for the risk they undertake by investing in the company.

Cost of Debt Financing

The total expenses a company incurs in order to borrow money, including interest payments, transaction fees, and any other associated costs.

Business Risk

The exposure to factors that can lead to a reduction in the value of an investment or in the revenues of a business.