A company’s vertical analysis of the income statement shows that COGS is consistently 60% of net sales, but horizontal analysis shows that COGS increased by 25% this year while net sales only increased by 10% . What does this likely indicate?

Question

A company’s vertical analysis of the income statement shows that  COGS  is consistently 60% of net sales, but horizontal analysis shows that  COGS increased by 25%  this year while  net sales only increased by 10% . What does this likely indicate?

Answer

The cost structure has become less efficient, reducing profitability

Answer

The company reduced its production costs through economies of scale

Answer

The company improved gross margin efficiency

Answer

The company’s inventory turnover has increased

Crowdly

A company’s vertical analysis of the income statement shows that COGS is consi...

Want instant access to all verified answers on moodle.kent.ac.uk?