EX 3-28 Vertical analysis of income statement

The following data (in millions) are taken from the financial statements of Nike Inc. for
the years ending May 31, 2009 and 2008:
                                                                        2009                   2008
Net sales (revenues)                                      $19,176               $18,627
Net income                                                    1,487                     1,883
a. Determine the amount of change (in millions) and percent of change in net income
for 2009. Round to one decimal place.
b. Determine the percentage relationship between net income and net sales (net income
divided by net sales) for 2009 and 2008. Round to one decimal place.
c. What conclusions can you draw from your analysis?

Answer:
a. $396 million decrease ($1,487 – $1,883)
    21.0% ($396 ÷ $1,883) decrease

b. 2009: 7.8% ($1,487 ÷ $19,176)
 2008: 10.1% ($1,883 ÷ $18,627)

c. The net income decreased during 2009 by $396 million, or 21.0%, from 2008,
an unfavorable trend. The percent of net income to net sales also decreased.