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1.) What is the difference between a multiple step and a single
1.) What is the difference between a multiple-step and a single-step format of the earnings statement? Which format is the most useful for analysis?
2.) How is a common-size income statement created?
3.) What are the two causes of an increasing or decreasing sales number?
4.) Discuss all reasons that could explain an increase or decrease in gross profit margin.
5.) Explain how a company could have a decreasing gross profit margin but an increasing operating profit margin.
6.) What is an example of an industry that would need to spend a minimum amount on advertising to be competitive? On research and development?
7.) Alpha Company purchased 30% of the voting common stock of Beta Company on January 1 and paid $500,000 for the investment. Beta Company reported $100,000 of earnings for the year and paid $40,000 in cash dividends. Calculate investment income and the balance sheet investment account for Alpha Company under the cost method and under the equity method.
8.) Discuss the four items that are included in a company’s comprehensive income.
9.) Explain what can be found on a statement of stockholders’ equity.
10.) Why is the bottom line figure, net income, not necessarily a good indicator of a firm’s financial success?
11.) Using the excerpt from the Moon Company’s annual report, calculate any profit measures deemed necessary and discuss the implications of the profitability of the company.
12.) LA Theatres Inc. has two distinct revenue sources, ticket and concession revenues. The following information from LA Theatres Inc. income statements for the past three years is
available:
(in millions) 2016 2015 2014
Ticket revenue $1,731 $1,642 $1,120
Concession revenue 792 687 411
Total revenue $2,523 $2,329 $1,531
Cost of goods sold—tickets $ 951 $ 854 $ 549
Cost of goods sold—concessions 70 69 48
Total cost of goods sold $1,021 $ 923 597
Gross profit $1,502 $1,406 $ 934
a.) Calculate gross profit margins for tickets and concessions for all three years. Calculate an overall gross profit margin for LA Theatres Inc. for all three years.
b.) Analyze the changes in gross profit margin for all three years.
13.) Writing Skills Problem:
Income statements are presented for the Elf Corporation for the years ending December 31, 2016, 2015, and 2014.
Elf Corporation Income Statements for the Years
Ending December 31, 2016, 2015, and 2014
(in millions) 2016 2015 2014
Sales $700 $650 $550
Cost of goods sold 300 325 275
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
Required: What a one-paragraph analysis of Elf Corporation’s profit performance for the period.
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1.) What is the difference between a multiple step and a single
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