HORIZONTAL ANALYSIS USING INCOME STATEMENTS The consolidated 2009, 2008, and 2007 income statements for Cola, Inc., and Subsidiaries appear below.

Cola, Inc., and Subsidiaries Consolidated Statement of Income

(In millions except per share amounts)

December 31, 2009 2008 2007 Net sales $ 25,020.7 $ 21,970.0 $19,292.2 Costs and expenses:

Cost of goods sold (11,946.1) (10,611.7) (9,366.2)

Selling, general, and administrative expenses (9,864.4) (8,721.2) (7,605.9)

Amortization of intangible assets (303.7) (265.9) (208.3)

Operating profit $ 2,906.5 $ 2,371.2 $ 2,111.8 Interest expense (572.7) (586.1) (613.7)

Interest income 88.7 113.7 161.6 Income before income taxes $ 2,422.5 $ 1,898.8 $ 1,659.7 Provision for income taxes 834.6 597.1 597.5 Net income $ 1,587.9 $ 1,301.7 $ 1,062.2 Required:
. Prepare common size income statements for horizontal analysis.
. Indicate what Cola’s 2009, 2008, and 2007 tax rates were on its income before taxes.
. Explain why net income increased by a larger percentage than sales in 2009 and 2008.
Exercise