Task: In the library or on the Internet, find the most recent annual report of a company of your interest and answer the following questions regarding the company’s Income Statement:
Question 1: What accounting period(s) does the Income Statement (IS) cover? state specific dates, if possible.
Question 2: Is your company a merchandising company, a service company, a manufacturing company, or a mix of the just-mentioned? Which account on the IS tells you that?
Question 3: How much are the Net Sales in the most current acc. period covered in the IS? Calculate the percentage change in the Net Sales comparing the two most recent acc. periods covered in the IS. What does the change, that you found, indicate? Is the change a good sign or a bad sign for the company? Why?
Question 4: How much is the COGS in the most current acc. period covered in the IS? Calculate the percentage change in the COGS comparing the two most recent acc. periods covered in the IS. What does the change you found indicate? Is the change a good sign or a bad sign for the company? Why?
Question 5: How high is the Gross Profit? Is it large enough to cover the company’s operating expenses? What is the company’s Gross Profit Rate for the most current acc. period covered in the IS? How much from each dollar made in sales remains in the company for covering operating expenses? What long-term trend of Gross Profit Rate would you like to see in your company? Why? Suggest at least two approaches of how this long-term trend would be reached/kept.
Question 6: How are the operating expenses divided? Without looking at the Balance Sheet, do you think your company has some long-term assets? How do you know? What are they (what might they be?)? What is the biggest operating expense mentioned in the IS? Is there a way how this expense could be lowered? How?
Question 7: What is the company’s Income from Operations? Specify how it was calculated.
Question 8: Did your company incur income taxes in the most current acc. period covered in the IS? How big?
Question 9: Does the company have some nonoperating revenues and/or nonoperating expenses? How do you know = what are they? How did they probably start to exist?
Question 10: Was your company profitable in the given accounting period? Do you think that Net Income of your company is the same amount as cash received from customers by your company in the given accounting period? Why (not)?
REQUIREMENTS:
• 2-3 pages, double-spaced, Times New Roman 12
• add a copy of the Income Statement you used