The Chief Financial Officer of Shoes and Things, Inc. was reviewing the income statement of his firm in preparation for a meeting with the Board of Directors. The information is shown below.

Shoes and Things, Inc Income statement For the Years Ended December 31, 2019 & 2020

	2019	2020
Sales	$877,200	$923,147
COGS	343,720	344,160
Gross Profits	533,480	578,987
Selling and Administrative Expense	81,000	93,237
Depreciation Expense	112,000	120,000
Operating Income	340,480	365,750
Interest Expense	22,330	10,000
Earnings before taxes	318,150	355,750
Taxes (35%)	111,353	124,512
Net Income	$206,797	$231,238
Preffered Stock Dividends	-20,000	-20,000
Earnings Available to Common Stockholders	$186,797	$211,238
Shares Outstanding	100,000	100,000
Earnings Per Share	$1.87	$2.11

a. What is the percentage increase in sales between 2019 and 2020?

b. What is the percentage increase in Net Income between 2019 and 2020?

c. Assume you are asked why Net Income increased percentagewise more rapidly than sales. To answer this, take each expense account (from cost of goods sold through taxes) as a percentage of sales for each year and indicate whether it was a contributor or detractor from the superior growth in Net Income. Remember declining percentage costs contribute to profit. Also large amounts such as cost of goods sold have a greater impact than smaller amounts such as depreciation or interest.

d.If cost of goods sold could be reduced to 33 percent of sales in 2020 while all else remained constant (with the exception of taxes which remain at 35 percent of earnings before taxes), what would earnings per share be in 2020?

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