Interpreting common-size income statements. Nokia has a 28 percent worldwide market share in cellular phones, the largest share of any company. Its sales have grown approximately 50 percent annually in recent years. Nokia's cellular phones use digital technology, which permits them to interact with computers and the Internet. Exhibit 3.29 presents common-size income statements for Nokia for three recent

years. Discuss the likely reasons for the increasing profit margin for Nokia over the three-year period.

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Common-Size Income Statements for Nokia EXHIBIT 3.29 (Problem 41) Year 7 Year 8 Year 9 Sales Other Revenues 100.0% 100.0% 100.0% 1.6 1.2 0.5 Cost of Goods Sold (64.6) (62.3) (61.8) Selling and Administrative Expenses (10.4) (10.3) (9.5) Research and Development Expense (9.0) (8.8) (9.1) Interest Expense (1.9) (1.5) (1.2) Income Tax Expense (4.0) (5.7) (6.1) Net Income/Sales 11.7% 12.6% 12.8%