Ronaldo Soccer Shop's income statement reports sales of $100,000; cost of goods sold of $46,000, operating expenses of $34,000, interest expense of $15,000, income tax expense of $2,000, and net income of $3,000. If you were to perform a vertical analysis of this income statement, you would divide each of these income statement line items by:

a. $3,000

b. $46,000

c. $34,000

d. $100,000

d. $100,000

Explanation:

Ronaldo Soccer Shop

Income Statement

Sales $100,000;

Cost of goods sold $46,000,

Operating expenses $34,000,

Interest expense $15,000,

Income tax expense $2,000,

Net Income $3,000

The vertical analysis of the income statement is performed by dividing each of these income statement line items by the total sales.

Vertical Analysis (income Statement) = (Income Statement Item / Total Sales) * 100