Question

Review the summary income statement below. How did this firm perform in 2019 compared to 2018? Give at least two specific examples to support your position. Show your work.

(all numbers in thousands)	2019	2018
Net Sales	3,000	2,650
Cost of Goods Sold	(1,400)	(1,150)
Gross Profit	1,600	1,500
Operating Expenses (SG&A)	(800)	(710)
Operating Profit	800	790
Other Income (Expense)	(90)	30
Extraordinary Gain (Loss)	350	(50)
Interest Expense	(200)	(150)
Net Profit Before Taxes (Pretax Income)	860	620
Taxes	(250)	(200)
Net Income	610	420

Answer 1

Sol:

1.Net sales in 2019 is higher compare to 2018 that helped company to increase their gross profit even 2019 cost of goods sold is higher than 2018.

2.Company's operating expenses and other income / expenses is higher than previous year. It shows company's management is not good at operating management along with it other expenses has increased.

3.Operating profit is slightly higher than previous year along with extraordinary income is very high than previous year it shows any fixed assets or long term non current assets maybe sold by the company.

4.Interest expenses is high compared to previous year as it shows more borrowing for company.

5.Net profit before tax is very high as extraordinary income and sales have given it a push despite huge expenses.

6.Net income increased despite tax increase only because Net profit before tax is high due to extraordinary income and sales.