Chapter 13: Analysis of Financial Statements In horizontal analysis of an income statement, a company reported sales of $50.000 at the end of Year 1 ar $40,000 at the end of Year 2. The percentage change in sales, using Year 1 as the base year, is a A 25% increase B. 25% decrease C. 20% increase D. 20% decrease In vertical analysis of a balance sheet, each asset amount is stated as a percent of A. total liabilities B. total assets C. revenue (sales) D. net income 3. What type of analysis does the following indicate? Common-Size Percents (in thousands) Year 2 Year 1 Year 1 $100 Sales $ 120 100% 100% 90 60% 75% Cost of sales Gross profit Operating expenses Net income 40% 25 A. Vertical analysis B. Trend analysis C. Ratio analysis D. Horizontal analysis Which ratio measures solvency? A. Return on total assets B. Dividend yield C. Debt ratio D. Accounts receivable turnover The formula for calculating the profit margin ratio is A. Net sales - Net income B. Net sales/Average total assets C. Net incomeNet sales D. Net income/Average total assets i noch of S20.000, accounts receivable of $30,000, inventory of $50,000