Athletic World reports the following vertical analysis percentages. 2021 2020 Sales 100 % 100 % Cost of goods sold 35 % 32 % Operating expenses 45 % 51 % 1. Did Athletic World's income before tax as a percentage of sales increase, decrease, or stay the same? Increase Decrease Stay the same 2. If net income as a percentage of sales increases, does that mean net income also increases? Yes No

1) Increased

2) No

Explanation:

As per the data given in the question,

1) Income statement:

2021 2020

Sales 100% 100%

Cost of goods sold 35% 32%

Gross profit 65% 68% (Sales - Cost of goods)

Operating expenses 45% 51%

Income before tax 20% 17% (Gross profit - Operating expense)

Income of Athletic World's, before tax as a percentage of sales Increased.

2. No, It is not necessary to increasing in net income when net income of sale as percentage increases.