Table 2. Solace Espresso Co.: Vertical (Common-Size) Income Statement
Annual Period 2024 2025 Change Revenue 100.0% 100.0% 0.0% Cost of Goods Sold (COGS) 62.0% 62.5% +0.5% Gross Profit 38.0% 37.5% −0.5% Selling, General & Administrative (SG&A) 30.0% 33.8% +3.8% Operating Income 8.0% 3.7% −4.3% Interest Expense 0.8% 1.2% +0.4% Earnings Before Tax (EBT) 7.2% 2.5% −4.7% Income Tax Expense 1.5% 0.6% −0.9% Net Income 5.7% 1.9% −3.8%
Solace’s executive team is concerned about the decline in operating income as a percentage of revenue between 2024 and 2025. Based on Table 2 above, which change appears to be the primary driver of this decline?