Answer to Question #260320 in Accounting for Samuelsk

Question

1. The management of XYZ Company provides you with comparative balance sheets of the years ended December 31, 2012 and 2011. Management asks you to prepare a horizontal analysis on the information.

As indicated in table above sales increased by 8.3% while net income decreased by 21.9%. You identified that there were increases in both cost of goods sold (14.3%) and operating expenses (2.1%). These increased costs more than offset the increase in sales, yielding an overall decrease in net income. You already identified the Couse of the problem. Therefore, what are the possible actions should be taken to eliminate the reduction of the net income?

2. Assume you are a manager of XY Company, while you conduct a vertical analysis it is identified that 85% of the company expenses are incurred for salary. This intern highly affected the profitability of the organization. As a manager what are the possible remedial actions that you suppose to take in order to mitigate this drawbacks?

Answer 1

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