Athletic World reports the following vertical analysis percentages. 2021 2020 Sales 100 % 100 % Cost of goods sold 35 % 32 % Operating expenses 45 % 51 % 1. Did Athletic World’s income before tax as a percentage of sales increase, decrease, or stay the same? Increase Decrease Stay the same 2. If net income as a percentage of sales increases, does that mean net income also increases? Yes No

1) It is Increased

2) No

1)  Income statement :  

                                                2021                  2020

Sales                                        100%                    100%  

Cost of goods sold                 35%                     32%  

Gross profit                              65%                    68%     (Sales - Cost of goods)  

Operating expenses               45%                     51%  

Income before tax                   20%                    17%  (Gross profit - Operating expense)  

Income of Athletic World's, before tax as a percentage of sales Increased.

2. No, It is not important to increasing the net income at the time when net income of sale in terms of percentage increases.

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1) Increased

2) No

Explanation:

As per the data given in the question,

1)  Income statement :

                                                 2021                  2020

Sales                                        100%                    100%

Cost of goods sold                 35%                     32%

Gross profit                              65%                    68%     (Sales - Cost of goods)

Operating expenses               45%                     51%  

Income before tax                   20%                    17%  (Gross profit - Operating expense)

Income of Athletic World's, before tax as a percentage of sales Increased.

2. No,It is not necessary to increasing in net income when net income of sale as percentage increases.

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explanation:

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