Ashford University Elf Corporation Income Statements Analysis Discussion
Need help with my Accounting question – I’m studying for my class.
Income Statement
Referencing this week’s readings and lecture, address the following:
- 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.
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 |
The Statement of Cash Flows
Referencing this week’s readings and lecture, describe the following terms as they relate to the statement of cash flows: cash, operating activities, investing activities, and financing activities. What can creditors, investors, and other users glean from an analysis of the statement of cash flows?
Analyzing the Statement of Cash Flows
Using the table below, explain the difference between net income and cash flow from operating activities for Techno in 2009 and analyze their cash flows for 2008 and 2009.
| (in thousands) | 2009 | 2008 |
| Net income | $ 316,354 | $ 242,329 |
| Noncash charges (credits) to income | ||
| Depreciation and amortization | 68,156 | 62,591 |
| Deferred taxes | 15,394 | 22,814 |
| $ 399,904 | $ 327,734 | |
| Cash Provided (Used) by Operating Assets and Liabilities: | ||
| Receivables | (288,174) | (49,704) |
| Inventories | (159,419) | (145,554) |
| Other current assets | (1,470) | 3,832 |
| Accounts payable, accrued liabilities | 73,684 | 41,079 |
| Total Cash Provided by Operations | $ 24,525 | $ 177,387 |
| Investment activities | ||
| Additions to plant and equipment | (94,1760) | (93,136) |
| Other investment activities | 14,408 | (34,771) |
| Net investment activities | ($ 79,768) | ($ 127,907) |
| Financing activities | ||
| Purchases of treasury stock | (45,854) | (39,267) |
| Dividends paid | (49,290) | (22,523) |
| Net changes in short-term borrowing | 125,248 | 45,067 |
| Additions to long-term borrowings | 135,249 | 4,610 |
| Repayments of long-term borrowings | (250,564) | |
| Net financing activities | $ 165,353 | ($ 262,677) |
| Increase (decrease) in cash | $ 110,110 | ($ 213,197) |
| Beginning cash balance | 78,114 | 291,311 |
| Ending cash balance | $ 188,224 | $78,114 |
