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Aa Aa E. 2. Horizontal analysis and interpretation income statement You can determine a lot by examining a company's income statement, but you can garner
Aa Aa E. 2. Horizontal analysis and interpretation income statement You can determine a lot by examining a company's income statement, but you can garner even more by looking at how a company's income statement changes from year to year. Horizontal analysis allows you to evaluate a company's financial condition over time by focusing on changes to each of the company's accounts. You would compare each account with itself in earlier periods and look for trends in the company's financial condition. Perform a horizontal analysis on Singh Co.'s income statement. Round all percentages to one decimal point (for example, 48.85% 48.9%) Singh Co. Comparative Income Statement For the Years Ended December 31, 2013 and 2012 Increase (Decrease) 2012 Amount Percent 2013 Sales $27,500 $25,000 Cost of goods sold 14,200 11,250 Gross profit $13,300 $13,750 $2,750 $2,500 Administrative expenses 3,750 Selling expenses 4,125 2,750 Research and development expenses 5,000 Total operating expenses $9,625 $11,250 Income from operations $3,675 $2,500 Interest expense 250 375 Income before income tax $3,425 $2,125 Income tax expense 1,000 600 $2,425 $1,525 Net income
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