Income Statement Analysis
The discussion questions for Weeks 2 – 4 are designed to help teach you to derive meaning from financial statements. Each week you will select a line item and use Variance Trend Analysis and Ratio Analysis to make some initial assessments about how the company is performing. Collectively, as a class we will seek to find the “story behind the numbers.” Let’s start applying what you have learned to a real-life Income Statement.
Locate and post a screenshot of an actual Income Statement from the company’s latest annual report (which can be found in the investor relations section of website) for one of the following companies:
Royal Caribbean Group
Nike
Boeing
Pick an Income Statement Line Item and a Ratio from the list below:
Line Item
Ratio
Revenue (aka Sales, Turnover)
Cost of Goods Sold/Cost of Sales
Selling, General and Administrative Expense
Gross Profit
Operating Profit
Net Profit
Gross Margin (%)
Net Margin (%)
Return on Sales
Return on Equity
Return on Assets
Earnings Per Share (EPS)
EBITDA
What do this line item and ratio measure and why is it important item for Management to understand these numbers?
Identify the past 4 years of amounts for your line item and ratio (Note: this will require you to track down additional historical Income Statements to get the older data). Share this data with the class using a data table or chart.
Answer the following questions:
What are the trends for this line item and ratio?
Have the line item and ratio amounts increased or decreased?
Is this a “good” thing or a “bad” thing? For this company?
What might management do to improve this line item and ratio?
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The discussion questions for Weeks 2 – 4 are designed appeared first on Academia Sharks.