Analyzing an Income Statement

PAPER 2

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

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
 
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