2 question 1 paper

Required Resources

Text

Epstein, L. (2014).  Financial decision making: An introduction to financial reports  [Electronic version]. Retrieved from https://content.ashford.edu/

· Chapter 3: The Income Statement

Article

Ford Motor Company. (2014).  Ford Motor Company 2012 annual report (Links to an external site.). Retrieved from http://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf

Recommended Resources

Articles

Harper, D. (n.d.).  Financial statements: Cash flow (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf

. Investopedia. Retrieved from http://www.investopedia.com/university/financialstatements/financialstatements3.asp

Harper, D. (n.d).  Financial statements: Earnings (Links to an external site.) https://www.investopedia.com/terms/c/cashflowstatement.asp

. Investopedia. Retrieved from http://www.investopedia.com/university/financialstatements/financialstatements4.asp

Loth, R. (2011, October).  Understanding the income statement (Links to an external site.) https://www.investopedia.com/articles/04/022504.asp

. Investopedia. Retrieved from http://www.investopedia.com/articles/04/022504.asp

Question 1 – 250 words

Referencing this week’s readings and lecture, address the following:

· What are the two causes of an increasing or decreasing sales number?

· Discuss all the reasons that might explain an increase or decrease in gross profit.

Question 2- 250 words

Analyzing an Income Statement

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)	2010	2009	2008
Sales	$700	$650	$550
Cost of goods sold	350	325	275
Gross profit	350	325	275
Operating Expenses:
Administrative	100	100	100
Advertising and marketing	50	75	75
Operating profit	$200	$150	$100
Interest expense	70	50	30
Earnings before tax	$130	$100	$  70
Tax expense (50%)	65	50	35
Net income	$  65	$  50	$  35

PAPER 2

Income Statement – Ford Motor Company

In a two- to three-page paper (excluding the title and reference pages), explain the purpose of an income statement and how it reflects the firm’s financial status. Include important points that an analyst would use in assessing the financial condition of the company. Also, analyze Ford Motor Company’s income statement from its  2012 Annual Report (Links to an external site.) https://corporate.ford.com/content/dam/corporate/en/investors/reports-and-filings/Annual%20Reports/2012-annual-report.pdf