Eliminate the reduction of the net income

Assignment Help Financial Accounting

Reference no: EM133000789

Assignment Two

1. The management of XYZ Company provides you with comparative balance sheets of the years ended December 31, 2012 and 2011. Management asks you to prepare a horizontal analysis on the information.

XYZ CORPORATION Comparative Income Statements For the Years Ended December 31, 2012 and 2011
Increase (Decrease)
	2012	2011	Amount	%
Net sales	$ 520,000	$ 480,000	$ 40,000	8.3
Cost of goods sold	360,000	315,000	45,000	14.3
Gross margin	160,000	165,000	(5,000)	(3.0)
Operating expenses	128,600	126,000	2,600	2.1
Net operating income	31,400	39,000	(7,600)	(19.5)
Interest expense	6,400	7,000	(600)	(8.6)
Net income before taxes	25,000	32,000	(7,000)	(21.9)
Less income taxes (30%)	7,500	9,600	(2,100)	(21.9)
Net income	$ 17,500	$ 22,400	$ (4,900)	(21.9)

As indicated in table above sales increased by 8.3% while net income decreased by 21.9%. You identified that there were increases in both cost of goods sold (14.3%) and operating expenses (2.1%). These increased costs more than offset the increase in sales, yielding an overall decrease in net income. You already identified the Couse of the problem. Therefore, what are the possible actions should be taken to eliminate the reduction of the net income?

2. Assume you are a manager of XY Company, while you conduct a vertical analysis it is identified that 85% of the company expenses are incurred for salary. This intern highly affected the profitability of the organization. As a manager what are the possible remedial actions that you suppose to take in order to mitigate this drawbacks?

Reference no: EM133000789

Questions Cloud

Is playing division one college football a job : Is playing Division 1 college football a job? Should it bring monetary compensation? Are college athletes exploited workers? Are they being treated unfairly

At what the P-E ratio the company trades : Question - Dyer Drilling Co. has a dividend yield of 5% and pays 50 percent of earnings in dividends. At what the P/E ratio the company trades

Calculate the correlation and covariance : Calculate the correlation and covariance for apple and amazon

Calculate the cost of equity : Calculate the cost of equity considering that the tax (the marginal tax rate) is 40%, and calculate the weighted average cost of capital

Eliminate the reduction of the net income : What are the possible actions should be taken to eliminate the reduction of the net income and what are the possible remedial actions that you suppose to take

What is the default risk premium on the corporate bond : A treasury bond that matures in 10 years has a yield of 4%. A 10-year corporate bond has a yield of 6%. Assume that the liquidity premium on the corporate bond

What is the total cost of the asset : I spent $100,000 on a new machine. it cost $2000 to ship it to my office, $1000 to install it, and $500 for initital testing. What is the total cost of asset

How many units were completed and transferred : At the end of the period, Department 2 had 6000 units, which were 20 per cent complete as to conversion costs. How many units were completed and transferred

Journalize and post adjusting entries : Journalize the above transactions in a two-column journal - Cost of supplies remained unconsumed on Mar 31 is Br 900

User Account

All Pages