# Profit analysis and causes of sale increase and decrease

Discussion 1 – Income statement

What are the two causes of an increasing or decreasing sales number? Discuss all the reasons that might explain an increase or decrease in gross profit.

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.  The focus of the analysis involves creating a common sized Income Statement for the three years and relating the parts of the statement to draw conclusions, ultimately to find the causes and effects of Elf’s performance for those three years.  Respond to at least two of your fellow students’ postings.

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

Assignment

Each chapter in the textbook contains a continuation of this problem.  The objective is to learn how to do a comprehensive financial statement analysis in steps as you learn the content of each chapter.  Keep this in mind as you complete each week’s written assignment.

• Open the financial statement analysis template that you saved from the Eastman Kodak 1 assignment and input the data from the Eastman Kodak income statement.  Use the basic earnings per share from continuing operations when inputting the earnings per share amount.  When you have finished inputting the data, review the income statement to make sure there are no red blocks indicating that your numbers do not match the cover sheet information you input from the Eastman Kodak 1 assignment.  Make any necessary corrections before saving a “print out” of both your input and the common-size income statement that the template automatically creates for you.  You will submit this “print out” to your instructor.
• Analyze the income statement of Eastman Kodak.  Write a 2-page summary that includes important points that an analyst would use in assessing the profitability of Eastman Kodak.

This is the template Template-FinStatement_v10_1_2003r2 (3).xlsx

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