Question Completion:
INSIGNIA CORPORATION
Income Statements (amounts in billions)
For the Year Ended December 31
2015 2014
Sales Revenues 126 266
Cost of Crude Oil and Products 63 153
Other Operating Costs 61 55
Income before Income Tax Expense 2 58
Income Tax Expense 0 30
Net Income 2 28
Answer:
a. Horizontal analysis:
Change in
2015 2014 Dollars Percentage
Sales Revenues 126 266 -140 -53%
Cost of Crude Oil and Products 63 153 -90 -59%
Other Operating Costs 61 55 6 11%
Income before Income Tax Expense 2 58 -56 -96%
Income Tax Expense 0 30 -30 -100%
Net Income 266 83 153 61 30 28 2 28 -26 -93%
b. Vertical Analysis
2015 % 2014 %
Sales Revenues 126 100% 266 100%
Cost of Crude Oil and Products 63 50% 153 57.5%
Other Operating Costs 61 48.4% 55 20.7%
Income before Income Tax Expense 2 1.6% 58 21.8%
Income Tax Expense 0 0% 30 11.3%
Net Income 2 1.6% 28 10.5%
c. Excluding income tax and other operating costs, Insignia did not earn more profit per dollar of revenue in 2015 compared to 2014. Instead, it earned less, 1.6% in 2015 compared to 21.8% in 2014.
Explanation:
a) Data and Calculations:
Change in
2015 2014 Dollars Percentage
Sales Revenues 126 266 -140 -53%
Cost of Crude Oil and Products 63 153 -90 -59%
Other Operating Costs 61 55 6 11%
Income before Income Tax Expense 2 58 -56 -96%
Income Tax Expense 0 30 -30 -100%
Net Income 266 83 153 61 30 28 2 28 -26 -93%
