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

question 67

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:

Dopamine

A neurotransmitter that plays a key role in the brain's reward system and is involved in regulating mood, motivation, and attention.

Schizophrenia

A psychological condition marked by disturbances in cognitive functions, sensory interpretations, affective reactions, and interpersonal relationships.

Interaction

A dynamic process involving two or more entities where actions, behaviors, or processes have an effect upon one another.

Epigenetics

Study of how environmental conditions can change the expression of genes without changing the gene sequence.