EX 2-23 Horizontal analysis of income statement

The following data (in millions) is taken from the financial statements of Target
Corporation.
                                                                                     2009                2008
                                   Net sales (revenues)                $64,948            $63,367
                                  Total operating expenses            60,546              58,095
a. For Target Corporation, comparing 2009 with 2008, determine the amount of change
in millions and the percent of change for:
      1. Net sales (revenues)
       2. Total operating expenses
b. What conclusions can you draw from your analysis of the net sales and the
total operating expenses?

Answer:
a. 1.      Net sales: $1,581 million increase ($64,948 – $63,367)
                             2.5% increase ($1,581 ÷ $63,367)
 2.         Total operating
              expenses: $2,451 million increase ($60,546 – $58,095)
                               4.2% increase ($2,451 ÷ $58,095)

b. During 2009, the percentage increase in total operating expenses (4.2%) is
more than the percentage increase in net sales (2.5%), an unfavorable trend.