Vertical analysis (common size) percentages for Osborne Hot Dogs sales cost of goods sold and

QUESTION

Vertical analysis (common size) percentages for Osborne Hot Dogs sales, cost of goods sold, and expenses are as follows:Vertical Analysis200720062005Sales100.0100.0100.0Cost of goods sold59.262.464.5Expenses25.026.627.5Did Osbornes net income as a percent of sales increase, decrease, or remain unchanged over the three-year period? Provide numerical support for your answer.
For making the Vertical Analysis, we have taken the Sales Values as 100% for all the three years and then calculating the % of other sub categories of income statement. % Value = Value of Subcategory/ Sales Vertical Analysis 2007 2006 2005 Sales 100% 100% 100% Cost of goods sold 59.20% 62.40% 64.50% Expenses

25% 26.60% 27.50% Net Income Sales Cost of Goods sold Expenses Net Income 15.800% 11.000% 8.000% So we can see that Net income as a percentage of Sales has increased from 8.00% in 2005 to 15.80% in 2007.

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