Comprehensive Income Trends
IDQ’s income statement data for the years ended November 30, 2000 and 2001 are presented below (dollars in millions).
|
11/30/00 |
11/30/01 |
|
|
Net sales |
$1061 |
$1154 |
|
Cost of goods sold |
792 |
830 |
|
Gross profit |
269 |
324 |
|
Selling, general, and administrative |
111 |
134 |
|
Income before depreciation |
158 |
190 |
|
Nonoperating income |
5 |
6 |
|
Income before tax |
163 |
196 |
|
Provisions for income tax |
64 |
76 |
|
Net income |
$ 99 |
$ 120 |
|
Dividends |
(10) |
(12) |
|
Foreign exchange adjustment |
4 |
36 |
|
Unrealized loss on securities |
(7) |
(9) |
|
Accumulated depreciation |
(79) |
(82) |
Required
a. Review the annual income statements for each year. Identify any unusual items and any items that shouldn’t appear on an income statement.
b. Using the data presented, prepare statements of comprehensive income for each year. Evaluate and discuss the differences between the income statement as originally shown and your statements of comprehensive income.
Discuss the trends shown in net income and comprehensive income. Which are more helpful and useful for managers? For investors? Why?
c. Compute a vertical analysis of each income statement. Comment on any differences in the return on sales ratio as derived from each statement. Also comment on any differences in the trends shown by the ROS ratios.
d. Using the following balance sheet data, compute each ratio and comment on any differences in the ratios as derived from each statement.
i. Assuming average assets of $420 and $390 (million) in 2000 and 2001 respectively, calculate return on assets (ROA) for each year. Evaluate the trends shown in each ratio.
ii. Assuming average shareholders’ equity of $150 and $135 (million) in 2000 and 2001 respectively, calculate return on equity (ROE). Evaluate the trends shown in each ratio.