Question

In: Finance

Years Jan-12 Jan-11 Jan-10 Net Sales $70.395,00 $67.997,00 $66.176,00 Cost of Good Sold 46133 44693 43764...

Years

Jan-12

Jan-11

Jan-10

Net Sales

$70.395,00

$67.997,00

$66.176,00

Cost of Good Sold

46133

44693

43764

Gross Profit

24262

23304

22412

Operating Expense

Selling and administrative expenses

16028

15849

15902

Depreciation and amortization

1573

1616

1707

Total operating charge

17601

17465

17609

Operating profit

6661

5839

4803

Other Income (expense)

Interest income

(13)

(15)

(18)

Interest expense

606

530

676

Interest and other, net

593

566

821

Earnings before income taxes

6068

5273

3982

Provision for income taxes

2185

1935

1362

Net Earnings

$ 3.883,00

$ 3.338,00

$  2.661,00

Weighted average common shares outstanding:

Basic

$        2,49

$        2,03

$        1,58

Diluted

$        2,47

$        2,01

$        1,57

how sales evolve from 2011 to 2012, what pace have operating cost increased or decreased in comparison and what could be causes of evolution in gross profit? 300 words minimum please

Solutions

Expert Solution

Sales Evolution, COGS, Gross Profit, Operating Expenses and Operating Income all this can be easily studied with the help of below table.

Sales Evolution:

Sales jumped 3.5% up to 70395 in FY2012 from 67997 in FY2011 sales growth in FY2011 from FY2010 was only 2.8%.

COGS Gross Profit Evolution.

COGS is directly related to sales as sales increases the COGS should also increase in direct proportion, but sometimes economies of scale like getting raw material at low cost due to large volumes helps in decreasing the COGS which further helps in improving gross margins.

COGS as a % of sales for FY2012 was 65.5% which is 20 Bps less than FY 2011 65.7%. Savings in COGS of 20 bps lead to increase in Gross Profit by 20 bps in 2012 to 34.5%

Gross Margins show continue improvements from last 2 years gross margin in FY2012 was at 34.5%, in FY2011 it was at 34.3% and in FY2010 it was at 33.9%.

Further Moving on to Operating Expenses:

Operating expense show decreasing trend from last 2 years it was 22.8% of sales in 2012 and 23.3% in 2011 as compared to 22.8%.

Low Opex results into higher operating margins which is actually true in this case as operating margin is on increasing trend since last 2 years.

Operating Margin in 2012 was 9.5% and 8.6% in 2011 as compared to 7.3% in 2010 which is showing a healthier increasing trend.


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