Interpreting an Income Statement A recent Consolidated Statement of Income for the Coca Cola Company and Subsidiaries is presented below.
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Consolidated Statements of Income |
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Year Ended December 31 |
2001 |
2000 |
1999 |
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(In millions except per share data) |
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NET OPERATING REVENUES |
$20,092 |
$19,889 |
$19,284 |
|
Cost of goods sold |
6,044 |
6,204 |
6,009 |
|
GROSS PROFIT |
14,048 |
13,685 |
13,275 |
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Selling, administrative and general expenses |
8,696 |
8,551 |
8,480 |
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Other operating charges |
0 |
1,443 |
813 |
|
OPERATING INCOME |
5,352 |
3,691 |
3,982 |
|
Interest income |
325 |
345 |
260 |
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Interest expense |
289 |
447 |
337 |
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Other income (loss) |
282 |
190 |
86 |
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INCOME BEFORE INCOME TAXES AND |
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CUMULATIVE EFFECT OF ACCOUNTING CHANGE |
5,670 |
3,399 |
3,819 |
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Income taxes |
1,691 |
1,222 |
1,388 |
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INCOME BEFORE CUMULATIVE EFFECT OF |
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ACCOUNTING CHANGE |
3,979 |
2,177 |
2,431 |
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Cumulative effect of accounting change, |
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net of income taxes |
10 |
0 |
0 |
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NET INCOME |
$3,969 |
$2,177 |
$2,431 |
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BASIC NET INCOME PER SHARE |
$1.60 |
$0.88 |
$0.98 |
|
Before accounting change |
0 |
0 |
0 |
|
Cumulative effect of accounting change |
$1.60 |
$0.88 |
$0.98 |
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DILUTED NET INCOME PER SHARE |
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Before accounting change |
$1.60 |
$0.88 |
$0.98 |
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Cumulative effect of accounting change |
0 |
0 |
0 |
|
$1.60 |
$0.88 |
$0.98 |
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AVERAGE SHARES OUTSTANDING |
2,487 |
2,477 |
2,469 |
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Dilutive effect of stock options |
0 |
10 |
18 |
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AVERAGE SHARES OUTSTANDING ASSUMING DILUTION |
2,487 |
2,487 |
2,487 |
Required
A. What is the amount of cost of goods sold for 1999, 2000, and 2001? What kinds of costs are included in cost of goods sold?
B. What does gross profit represent? Calculate gross profit as a percentage of net operating revenues for each year. What do you observe?
C. How does gross profit differ from operating income?
D. Is Coca Cola more profitable in 2001 than in 1999? Explain.