Horizontal and vertical analysis of the income statement for a retail company selling women’s clothing is shown below. 

Instructions 

a. How effectively has the company controlled its cost of goods sold and operating expenses over the four-year period? 

b. Identify any other income statement components that have significantly changed over the four-year period for the company. 

c. Identify any additional information that might be helpful to you in your analysis of this company over the four-year period. 

Explain how a horizontal analysis is affected if an account 

(1) Has no value in a base year and a value in the next year

(2) Has a negative value in the base year and a positive value in the next year.

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Net sales Cost of goods sold Gross profit Operating expenses Profit from operations Other revenues and expenses Interest expense Other revenue Profit before income tax Income tax expense Profit for the year TARA CORPORATION Horizontal Income Statement Year Ended January 31 Net sales Cost of goods sold Gross profit Operating expenses Profit from operations Other revenues and expenses Interest expense Other revenue Profit before income tax Income tax expense Profit for the year 2024 140.0% 148.3% 127.5% 171.4% 93.3% 40.0% 240.0% 140.0% 160.0% 135.2% 2024 100.0% 63.6% 36.4% 21.4% 15.0% TARA CORPORATION Vertical Income Statement Year Ended January 31 (2.9)% 0.9% 2023 111.0% 113.3% 107.5% 133.1% 87.6% 13.0% 2.9% 10.1% 60.0% 140.0% 110.8% 116.0% 109.5% 2023 100.0% 61.2% 38.8% 21.0% 17.8% (5.4)% 0.6% 13.0% 2.6% 10.4% 2022 114.0% 116.7% 110.0% 126.9% 96.9% 80.0% 200.0% 113.8% 124.0% 111.4% 2022 100.0% 61.4% 38.6% 19.5% 19.1% (7.0)% 0.9% 13.0% 2.7% 10.3% 2021 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 2021 100.0% 60.0% 40.0% 17.5% 22.5% (10.0)% 0.5% 13.0% 2.5% 10.5%