In examining Luke Company's current-period income statement, you notice that Research and Development expenses are 62% of sales revenue. Luke has most likely provided a. a horizontal analysis. b. a horizontal analysis using sales as the base. c. a vertical analysis using sales as the base. d. a vertical analysis using net income as the base. e. None of these choices are correct.

Question

Houston

Business

11 November, 11:52

In examining Luke Company's current-period income statement, you notice that Research and Development expenses are 62% of sales revenue. Luke has most likely provided a. a horizontal analysis. b. a horizontal analysis using sales as the base. c. a vertical analysis using sales as the base. d. a vertical analysis using net income as the base. e. None of these choices are correct.

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Answers (2)

Know the Answer?

Brianna · Answer 1

C) A vertical analysis using sales as the base

Keaton · Answer 2

The correct answer is the option C: a vertical analysis using sales as the base.

Explanation:

To begin with, the concept known as ''vertical analysis'' is a tool or method used in the financial statements whose main purpose is to analize the changes that were made in the financial statement being analized and it uses a base figure within the statement in order to list each item inside the paper as a percentage of the base used.

To sum up, in this case, Luke has most likely provided a vertical analysis using sales as the base in order to determinate the percentage of the other items according to the sales.