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Use the Common-Size Income Statement for Company A and Company B to answer this question. Company A Common Size Company B $ Common Size % $ % Revenue $132,110 100.0% 89,597 100.0% Cost of Revenue 87,257 66.0% 60.025 67.0% Gross Profit 44,853 34.0% 29,572 33.0% Selling, general and administrative 24,447 18.5% 18,529 20.7% Depreciation 2.128 1.6% 1.396 1.6% Operating profit 18,278 13.8% 9,647 10.8% Investment income 47 .036% 11 .012% Loss Debt Extinguishment 1057 1.29 Interest Expense 1.347 1.0% 859 1.0% Income from continuing operations 16,978 12.9% 7,742 8.69 Provision (benefit) for income taxes 4.112 3.1% 1.907 2.19 Net income 12,866 9.7% 5,835 6.5" Which of the following reasons explain why Company A has a higher operating profit margin?

Use the Common-Size Income Statement for Company A and Company B to answer this question. Company A Common Size Company B $ Common Size % $ % Revenue $132,110 100.0% 89,597 100.0% Cost of Revenue 87,257 66.0% 60.025 67.0% Gross Profit 44,853 34.0% 29,572 33.0% Selling, general and administrative 24,447 18.5% 18,529 20.7% Depreciation 2.128 1.6% 1.396 1.6% Operating profit 18,278 13.8% 9,647 10.8% Investment income 47 .036% 11 .012% Loss Debt Extinguishment 1057 1.29 Interest Expense 1.347 1.0% 859 1.0% Income from continuing operations 16,978 12.9% 7,742 8.69 Provision (benefit) for income taxes 4.112 3.1% 1.907 2.19 Net income 12,866 9.7% 5,835 6.5" Which of the following reasons explain why Company A has a higher operating profit margin?

Corporate Financial Accounting
Corporate Financial Accounting
14th Edition
ISBN:9781305653535
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter14: Financial Statement Analysis
Section: Chapter Questions
Problem 14.2BE: Vertical analysis Income statement information for Einsworth Corporation follows: Sales 1,200,000...
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Question 8 Use the Common-Size Income Statement for Company A and Company B to answer this question. Company A Common Size $ Company B $ Common Size % % Revenue $132,110 100.0% 89,597 100.0% Cost of Revenue 87.257 66.0% 60.025 67.0% Gross Profit 44,853 34.0% 29,572 33.0% Selling, general and administrative 24,447 18.5% 18,529 20.7% Depreciation 2.128 1.6% 1.396 1.6% Operating profit 18,278 13.8% 9,647 10.8% Investment income 47 .036% 11 .012% Loss Debt Extinguishment 1057 1.2% Interest Expense 1.347 1.0% 859 1.0% Income from continuing operations 16,978 12.9% 7,742 8.6% Provision (benefit) for income taxes 4.112 3.1% 1,907 2.1% Net income 12,866 9.7% 5,835 6.5% Which of the following reasons explain why Company A has a higher operating profit margin? Company A has higher tax expense relative to sales. O Company A has a higher markup and/or lower inventory costs. Company A has more investment income relative to sales. O Company A has more sales.
Transcribed Image Text:Question 8 Use the Common-Size Income Statement for Company A and Company B to answer this question. Company A Common Size $ Company B $ Common Size % % Revenue $132,110 100.0% 89,597 100.0% Cost of Revenue 87.257 66.0% 60.025 67.0% Gross Profit 44,853 34.0% 29,572 33.0% Selling, general and administrative 24,447 18.5% 18,529 20.7% Depreciation 2.128 1.6% 1.396 1.6% Operating profit 18,278 13.8% 9,647 10.8% Investment income 47 .036% 11 .012% Loss Debt Extinguishment 1057 1.2% Interest Expense 1.347 1.0% 859 1.0% Income from continuing operations 16,978 12.9% 7,742 8.6% Provision (benefit) for income taxes 4.112 3.1% 1,907 2.1% Net income 12,866 9.7% 5,835 6.5% Which of the following reasons explain why Company A has a higher operating profit margin? Company A has higher tax expense relative to sales. O Company A has a higher markup and/or lower inventory costs. Company A has more investment income relative to sales. O Company A has more sales.
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