The cost of goods went up in dollars spent, but the percentage was a constant 50%. When you are looking at the income statem

Please read each passage below, I need a few sentences in response to each part. Please use at least one source. Please cite the reference(s) properly. Part 1, 2 and 3 can be on the same page, however, please keep them separate by labeling them Part 1, Part 2 and 3. No Title Page Needed DUE TOMORROW 2/21/22 by 6PM CST

PART 1 Instr. (this is in reference to the discussion post)

Nice work on this week's topic. The cost of goods went up in dollars spent, but the percentage was a constant 50%. When you are looking at the income statement compare year over year percentages. The percentage change can give you a better view of which line items truly are concerns or positives you would want to examine more closely. In this example period, Operating profit increased in both dollars and percentages. Elf Corporation did a good job of lower expenses in two of the three categories. You are correct in stating the trends for this Corporation appear to be good. Discuss the four items that are included in a company's comprehensive income.

PART 2

                When reviewing the income statement, it looks to me like they were able to increase their net income by $15 million by maintaining some costs, lowering some costs, and by minimizing the increase of most of their expenses. I noticed that the increase in in sales was half of what it was in the previous year, 18% increase in 2009 and 7.7% increase in 2010. Their ability to manage their costs efficiently helped them to grow their net income, however that was still down from the previous year. There was a 42% increase in 2009 to the net income and a 30% increase in 2010. I noticed that in the first two years, they invested heavily in marketing and the in the last year, 2010, they reduced their spending in that area by 33%.  That could be why the growth in sales for 2010 was not as large as the year prior.

(Epstein, 2014)

References

Epstein, L. (2014). Financial Decision Making: An Introduction to Financial Reports. Bridgepoint Education, Inc.

PART 3

Write a one-paragraph analysis of Elf Corporation’s profit performance for the period.  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?

     Based on the common-sized income statement, one can evaluate and come to a conclusion of what may have happen, financially, over the three-year duration.  

· Gross Profit – Revenue and Cost of Goods Sold increased year over year for the three-years leading to an overall increase in Gross Profit.  This would suggest that there was an increase in customers or products sold creating a demand for additional need for products.

· Operating Expenses

· Selling, General, and Administrative costs remained the same over the three-year comparison illustrating there was no change (or additional positions) in this cost category.

· Research, development, engineering costs decreased from 2009 to 2010 suggesting that there was a slow down in product development that may have come from a larger need for the products available rather than new product research

· Other expenses

· Interest Expense – With an increase in interest expense each year, this would point to a cost incurred from borrowed funds (bonds, loans, lines of credit).  "For most people, mortgage interest is the single-biggest category of interest expense" (Kagan, 2021).  This would suggest that the Elf Corporation expanded its stores or in-store presence in other retailers. 

· Income Before Tax/ Net Profit 

· Over the three-year comparison, the Elf Company has increased the overall Income providing growth of 1.3% from 2008 to 2009 and 1.6% from 2009 to 2010 over previous year growth. 

Overall, by analyzing the common-sized income statement one can conclude that the Elf Corporation was in a growth stage from 2008-2010 increasing it's overall retail footprint through either store front or in-store partnerships generating positive gross profit, reducing overall operating expenses, and gaining positive profit growth over the three-year comparison. 

Common-Sized Income Statement: Elf Corporation

Epstein, L. (2014).  Financial decision making: An introduction to financial reports . Retrieved from https://content.uagc.edu/ (Links to an external site.)

Kagan, J. (2021). Interest Expense. Retrieved from https://investopedia.com/terms/i/interestexpense.asp (Links to an external site.) . Retrieved on February 15, 2022. 

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