Financial statements for Apparel, Inc., appear below.

Required:
1. Prepare common size income statements and balance sheets for Apparel to be used in vertical analysis.
2. Indicate whether gross margin grew as much as sales between 2007 and 2008 and between 2008 and 2009 and if so why it grew.
3. Indicate whether the relative proportion of Apparel's assets changed between 2008 and 2009 and if so, explain the change.
4. Indicate whether the relative proportion of Apparel's liabilities and equity changed between 2008 and 2009 and if so, explain the change.
5. Explain how Apparel appears to have financed the 7.5 percent increase in assets that occurred between 2008 and2009.

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ar nc Consolidated Statements of Income In thousands except per share amounts) 2009 2008 2007 Net sales Cost of goods sold Gross income General and administrative expenses 1259,896 Special and nonrecurring items $7,245,088 6,944,296 6,149,218 (4,355,675 $1,958,835 1,990,740 1,793,543 1,202,042) 1,080,843) $ 701,556 (63,685) 7,308 ing income 788,698 712,700 (62,398) 10,080 Interest expense er i Gain on sale of investments Income before income taxes Provision for income taxes Net income Net income per share $ 645,179 745,497 660,302 257,000 391,179 455,497 403,302 254,000 290,000 ar Consolidated Balance Sheets (In thousands) ASSETS Dec. 31, 2009 Dec. 31, 2008 Current assets: Cash and equivalents Accounts receivable Inventories Other $ 320,558 1,056,911 733,700 109,456 837,377 803,707 Total current assets Property and equipment, net Other assets Total assets $1,784,130 1,813,948 1,666,588 247,892 $4,135,105 $3,846,450 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities $ 250,363 347,892 $ 309,092 274,220 Accrued expenses Certificates of deposit Income taxes Total current liabilities Long-term debt Deferred income taxes Other long-term liabilities Total liabilities 93,489 $ 707,444 $650,000 $ 720,778 274,844 $1,693,812 LIABILITIES AND SHAREHOLDERS' EQU Shareholders' equity: $189,727 128,906 2,397,112 $2,715,745 (274,452 $2,441,293 $189,727 127,776 2,136,794 $2,454,297 (186,680) $2,267,617 $3,846,450 Common stock ai ca Retained eanings Less: Treasury stock, at cost Total shareholders' equity Total liabilities and shareholders' equity