discussion question 1840

/in /by

Week 3 Discussion

Collapse

Income Statement Analysis

This week’s DQ focuses on the Income Statement. It builds on the insights we gained in Week 2, but goes a little deeper in our use of financial statement analysis skills.

  1. Locate and post a screen shot of an actual Income Statement from the latest fiscal year for one of the following companies:
  2. Pick an Income Statement Line Item or Ratio from the list below:

Line Item

Ratio
  • Revenue (aka Sales, Turnover)
  • Cost of Goods Sold/Cost of Sales
  • Salary Expense
  • Selling, General and Administrative Expense
  • Gross Profit
  • Operating Profit
  • Net Profit
  • Gross Margin (%)
  • Net Margin (%)
  • Salary Expense as % of Sales
  • Return on Sales
  • Return on Equity
  • Return on Assets
  • Earnings Per Share (EPS)
  • EBITDA

  1. What does this line item or ratio measure and why is it important item for Management to understand this number?
  2. Identify the past 4 years of amounts for your line item or ratio (Note: this will require you to track down additional historical Income Statements to get the older data). Share this data with the class using a data table or chart.
  3. Answer the following questions:
    • What is the trend for this line item or ratio?
    • Has the line item or ratio amount increased or decreased?
    • Is this a “good” thing or a “bad” thing? For this company?
    • What might management do to improve this line item or ratio?