OMM 622 Week 3 Discussion 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?

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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