Income Statement Analysis

.     Income
Statement

 

Referencing this week’s readings and lecture, address the following: 

o    What
are the two causes of an increasing or decreasing sales number?

o    Discuss
all the reasons that might explain an increase or decrease in gross profit.

Respond to at least two of your classmates posts.

2.     Analyzing an Income Statement

 

Income statements are presented in the table below for the Elf Corporation for
the years ending December 31, 2010, 2009, and 2008. Write a one-paragraph
analysis of Elf Corporation’s profit performance for the period.  Create a
common-sized income statement for the three years. What conclusions can you
draw from the different parts of the statement? What are the causes and effects
of Elf’s performance for those three years?  

Elf Corporation Income Statements for the Years Ending December 31

(in
millions)
2010 2009 2008
Sales $700 $650 $550
Cost of
goods sold
  350   325   275
Gross
profit
  350   325   275
Operating
Expenses:
     
Administrative   100   100   100
Advertising
and marketing
    50     75  
  75
Operating
profit
$200 $150 $100
Interest
expense
    70     50  
  30
Earnings
before tax
$130 $100 $  70
Tax expense
(50%)
    65     50     35
Net income $  65 $  50 $  35

 

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