Financial Statement Analysis Vertical Analysis Practice Quiz ($ and units in 000s) 2018 2017 Analysis/Explaination Units 80.0 62.5 Sales 1,200 100% 1,000 100% COGS 720 500 Gross Profit 480 500 Selling Expense 204 250 Administrative Expense 216 150 Operating Income 60 100 Other Income(Expense) 84 Net Income 144 100 Required: Using vertical analysis, evaluate the results of operations in 2017 and 2018. Quantify the percentages of each line item to sales. Evaluate the drivers of net income, including gross profit, selling and administrative expenses, and other income. What is the overall percentage point change in profitability and what is the contribution (positive or negative) of each driver. Explain the effect of each driver on profitability and the possible scenarios of each based on the data above. Which are areas of concern? Which areas are positive? What additional questions would you have