Presented below is an income statement, with the past two years' results presented:
| |
2016 |
2015 |
| Revenue |
$4,200,000 |
$4,000,000 |
| Cost of goods sold |
$2,910,000 |
$2,800,000 |
| Gross profit |
$1,290,000 |
$1,200,000 |
| Selling cost |
$280,000 |
$250,000 |
| Administrative cost |
$140,000 |
$120,000 |
| Operating profit |
$870,000 |
$830,000 |
| Interest expense |
$78,000 |
$80,000 |
| Income before taxes |
$792,000 |
$750,000 |
| Income taxes |
$277,200 |
$262,500 |
| Net income |
$514,800 |
$487,500 |
Prepare a vertical analysis of both 2016 and 2015. Display percentages to 3 decimal places (.654 = 65.4%). Discuss any line items from the income statement that may warrant further investigation from management.