Analyzing Growth}

Consolidated financial statements for Initech Corporation follow.

\section*{Required:}
1. Prepare common size statement of earnings to be used for both vertical and horizontal analysis for 2017-2018 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above 2. Using the common size statement of earnings for both vertical and horizontal analysis prepared in part 1, indicate why Initech's profits increased more rapidly than sales for 2017 and 2018.
3. Prepare common size statements of financial position for vertical analysis for 2017 and 2018 (in percentage terms, rounded to two decimal places). You do not need to include the actual dollar amounts shown above.
4. Did the proportion of assets invested in the various classes of assets change significantly from 2017 to 2018 ?
5. How has Initech financed its growth in assets?
6. Did the statement of earnings change as much between 2017 and 2018 as the statement of financial position?

\section*{Case

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Initech Corporation Consolidated Statements of Earrings (in millions except per share amounts) Three Years Ended December 31, 2018 2017 2016 Net revenues $8,782 $5,844 $4,779 Cost of goods sold 3,252 2,557 2,316 Research and development 970 780 618 Marketing, general, and administrative expenses 1,168 1,017 765 Operating costs and expenses 5,390 4,354 3,699 Operating income 3,392 1,490 1,080 Interest expense (50) (54) (82) Interest income and other, net 188 133 197 Income before taxes Provision for taxes Net income 3,530 1,569 1,195 1,235 502 376 $2,295 $1,067 $ 819