Question

In: Accounting

The following is the income statement for Nikov and Co. for the year ended 31 December...

The following is the income statement for Nikov and Co. for the year ended 31 December 2014, along with information relating to the preceding year.

Income statement for the year ended 31 December

2014
£000		 2013
£000
Sales revenue 420.2 382.5
Cost of sales (126.1) (114.8)
Gross profit 294.1 267.7
Salaries and wages (92.6) (86.4)
Selling and distribution costs (98.9) (75.4)
Rent and rates (22.0) (22.0)
Bad debts written off (19.7) (4.0)
Telephone and postage (4.8) (4.4)
Insurance (2.9) (2.8)
Motor vehicle expenses (10.3) (8.6)
Depreciation – delivery van (3.1) (3.3)
– fixtures and fittings (4.3) (4.5)
Operating profit 35.5 56.3
Loan interest (4.6) (5.4)
Profit for the year 30.9 50.9

Required:

Analyse the performance of the business for the year to 31 December 2014 in so far as the information allows.

Solutions

Expert Solution

The performance of the business for the year to December 31, 2014 is shown as follows:-

1) Sales revenue of Nikov and Co. has increased from 382,500 in 2013 to 420,200 in 2014. The sales revenue of the company has improved from the last year.

2) The cost of sales of Nikov and Co. has also increased from 114,800 in 2013 to 126,100 in 2014.

3) The gross profit of Nikov and Co. has increased from 267,700 in 2013 to 294,100 in 2014 which shows that the performance of the company has improved significantly.

4) Salaries and Wages and selling and administrative costs has increase in 2014. Rent and rates remained same (no change). There is an increase in bad debt written off from 4,000 in 2013 to 19,700 in 2014.

5) All other expenses including telephone and postage, motor vehicle expenses, insurance and depreciation has also increased in 2014.

6) Operating profit has decreased from 56,300 in 2013 to 35,500 in 2014.

7) Net profit for the year has also decreased from 50,900 in 2013 to 30,900 in 2014.

Analysis: Gross profit of the company for the year 2014 has improved but operating profit and net profit of the company for the year 2014 has decreased. It means that company needs to improve its performance.

ekkarill92 answered 2 years ago
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