Business Finance - Accounting Week 2 Writing Assignment - Part 2

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California Crunch Company Financial Statement

Valery Salazar

Keiser University

Auditing 1

 Dr. Jennifer Bolden

March 11, 2023

California Crunch Company Financial Statement

Introduction:

The income statement for the years ending 31 December 2018 and 2017 of the California Crunch Companies summarizes the business's financial position. The income statement will be dissected, and steps will be suggested for raising the company's bottom line in this article (Bussoli et al., 2023). The income accounts for the year ending December 31, 2018, of California Crunch Companies include the company's sales, costs, and net income. Payroll costs, gross pay, deductions, and net pay may all be seen on the financial statements. This report aims to summarize and evaluate the financial statements of California Crunch Corporation (Conroy et al. 2022).

2.1 Sales and Cost of Goods Sold:

In 2018, California Crunch Industry's net sales were $8,353,542, up 4% from 2017's $7,998,832. The total cost of sales was up by 3%, from $3,621,532 in 2017 to $3,745,623 in 2018. While the uptick in revenue is encouraging, the corporation can boost its gross profit margin by cutting its cost of goods.

2.2 Gross Margin:

From $4,377,300 in 2017 to $4,607,919 in 2018, a 5% rise was seen in gross margin. Gross margin improvement is encouraging, but the firm has to sustain it by cutting costs and driving up sales. The long-term financial sustainability of the firm depends on keeping a stable gross margin. Improving operating efficiency, obtaining cheaper rates with suppliers, and investing in sales and marketing strategies to extend the client base are all things the firm should be doing to reduce the cost of products sold and increase revenues.

2.3 Operating Expenses:

Overall costs rose by $700,000, or 7%, to $3,130,312 in 2018 from $2,926,980 in 2017. Wages and salaries increased by 9 percent, which is a lot compared to inflation and other costs. To save on expenses, management must examine the company's pay scale.

The corporation may examine its compensation, wage structures, and other operational expenditures to see where savings might be made. To do so, the company may renegotiate contracts with its suppliers, cut down on discretionary expenditure, and enhance the effectiveness of its operations (Iacuzzi, 2022).

2.4 Operating Income:

Revenue from operations rose from $1,450,320 in 2017 to $1,477,607 in 2018, a 2% increase. An uptick in operating revenue is encouraging, but the firm may do even better by cutting its operational costs to boost its bottom line even more. A rise in operating cash flow from 2017 to 2018 is encouraging, but the firm must keep cutting costs to keep growing. This may be accomplished in several ways, including by increasing operational efficiency, renegotiating contracts with key suppliers, and simplifying relevant procedures. The corporation can strengthen its finances and expand by increasing its operational profits.

2.5 Interest Expense and Other Income:

The interest cost in 2018 was $84,658 (a 1% increase over 2017's $83,950). The percentage rise in other income from $5,725 in 2017 to $5,920 in 2018 was 3%. The corporation must cut its interest costs if it wants to boost its bottom line. The firm may look at debt refinancing at a reduced interest rate, creditor negotiations for more favorable conditions, or initiatives to increase cash flow and decrease dependency on debt financing if it wants to cut interest payments. If interest costs are lowering the company's net profit, it may be time to look elsewhere for growth or cost savings.

2.6 Income Taxes and Net Income:

The 2018 income tax filing threshold is $489,604, up 2% from the 2017 filing threshold of $480,233. The 2018 net income was $909,265 compared to the 2017 net income of $891,862. The company's net income may be increased by lowering its income tax rate. Employees have different payroll costs and deduction percentages depending on their pay rates and deduction amounts. Employee 117, for instance, earned $1,581.43 after deductions of 20.77% of their $24.95 hourly salary. Employee 149's hourly wage was $16.85; after taxes and other deductions, the total amount they received was $962.88. Net compensation for worker 162 was $1,368.58 at $20.25 per hour after deductions totaling 15.52 percent of salary.

3.0 Conclusion:

In conclusion, the payroll costs, deductions, and net compensation for the year ending December 31, 2018, may be gleaned from the financial accounts of California Crunch Corporation. Payroll costs were up by 4% yearly, with deductions rising by 9%. The bulk of the payroll budget went toward the payment of regular hours worked, whereas the bulk of the deductions went toward the payment of various taxes. The average rise in net pay was 2% over the previous year. However, this varied widely across workers due to differences in pay rates and deductions percentages. These financial statements assist managers in understanding the company's financial standing and making better choices for the company's future. To boost profits, California Crunch Company should work to lower the cost of products sold, cut its operational expenditures, and reevaluate its compensation practices. There is a need to decrease interest costs and income taxes if the firm is to increase its net income. California Crunch Corporation may enhance its financial performance and achieve its objectives if it follows these suggestions.

References

Bussoli, C., Giannotti, C., Marino, F., & Maruotti, A. (2023). Trade credit in Europe: Financial constraint and substitution effect in crisis times.  European Financial Management,  29(1), 327-348. https://onlinelibrary.wiley.com/doi/abs/10.1111/eufm.12362

Conroy, M., Fitzhenry, S., Seiberlich, K., Burke, T., & Nix, N. (2022). Case 7: Case Competition–Alphabet Audit.  Comprehensive Analysis of Financial Accounting Through Series of Case Studies, 45. https://egrove.olemiss.edu/cgi/viewcontent.cgi?article=3566&context=hon_thesis#page=50

Iacuzzi, S. (2022). An appraisal of financial indicators for local government: a structured literature review.  Journal of Public Budgeting, Accounting & Financial Management,  34(6), 69-94 https://www.emerald.com/insight/content/doi/10.1108/JPBAFM-04-2021-0064/full/html