Using the following information, prepare a vertical analysis of two years' income statements. fees earned is $153,500 for year 2 and $149,700 for year 1. operating expenses are $122,800 for year 2 and $127,245 for year 1. which of the following statements are true?

a. operating income has decreased as a percentage of revenue.
b. operating income has increased as a percentage of revenue.
c. none of these choices are correct.
d. operating expenses have increased as a percentage of revenue.

(B) Operating income has increased as a percentage of revenue

Explanation:

Conducting a vertical analysis,

Operating income (year 1) = Fees earned, less operating expenses

= 149,700 - 127,245 = $22,455

Therefore operating income as a percentage of revenue = 22,455/149,700 = 15%.

Operating income (year 2) = 153,500 - 122,800 = $30,700

Therefore operating income as a percentage of revenue = 30,700/153,500 = 20%.

Therefore, operating income as a percentage of revenue increased from year 1 to year 2.

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