OMM 622 week 3 discussion 2 Financial Decision Making

Analyzing an Income Statement

Ashford University Discussion

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)201020092008Sales$700$650$550Cost of goods sold  350  325  275Gross profit  350  325  275Operating Expenses:   Administrative  100  100  100Advertising and marketing    50    75    75Operating profit$200$150$100Interest expense    70    50    30Earnings before tax$130$100$  70Tax expense (50%)    65    50    35Net income$  65$  50$  35