Question 5: 4 marks (3 marks for question 1 and 1 mark for question 2)

Using the following operating data for Liwa Corporation, illustrate vertical analysis.

2008 2007

Net sales $350,000 $320,000

Cost of goods sold 200,000 100,000

Gross profit 150,000 220,000

Operating expenses 120,000 160,000

Net income 30,000 60,000

Instructions:

1- Using the data presented for Liwa Company, prepare a schedule showing a vertical analysis for 2007 and 2008 ( use net sales as base). (3 marks)

2- Interpret the percentage of Net income that you find for 2008. (1 mark)