Answer to Question #298038 in Accounting for tns

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?

Answer 1

Reduction in the cost of the goods which is the buying price and slightly increase the cost of selling or the selling price. The operating expenses also need to be reduced significantly to realise an increase in net income.