Question

Micatin Designs, Inc. Comparative Income Statement Years Ended December 31, 2018 and 2017 2018 2017 Net Sales Revenue $ 432,000 $375,000 Expenses: Cost of Goods Sold 201,000 186,250 Selling and Administrative Expenses 100,250 8,500 92,000 2,150 Other Expenses 309,750 Total Expenses 280,400 $ 122,250 $ 94,600 Net Income

Answer 1

1

Comparative Common-size income statement

Particulars	2018 (%)	2017 (%)
Net sales revenue	100%	100%
expenses:
Cost of goods sold	46.5% ($201000 / $432000)	49.7% ($186250 / $375000)
Selling and administrative expenses	23.2% ($100250 / $432000)	24.5% ($92000 / $375000)
Other expense	2% ($8500 / $432000)	0.6% ($2150 / $375000)
Total expenses	71.7% ($309750 / $432000)	74.8% ($280400 / $375000)
Net income	28.3% ($122250 / $432000)	25.2% ($94600 / $375000)

2

To an investor, 2018 is better as compared to 2017. It can be very clearly seen from the above statement that both 'Cost of goods sold' as well as 'Selling and administrative expense' of 2018 which are the two major expenses of Income statement consume a smaller percentage of 'Net sales revenue' as compared to the same for 2017. Not only that but 'Net income' takes a larger portion of 'Net sales revenue' as compared to 2017. So it can be said that for an investor, 2018 is more Favorable than 2017

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