Question

On this income statement, Briefly describe any trends that are apparent in the last three years (100 words)

American Airline Revenue Cost of Revenue Gross Profit SGA D&A Operating (EBI Net Interest Income Tax Expense Net Income EBITDA Gross Margin (%) EBITDA Margin (% Net Income Margin (%) SGA as % of Rev 42,207,000 40,180,000 40,990,000 9,880,000 11,096,000 31,117,000 30,300,000 29,894,000 24,645,000 22,782,000 21,275,000 0 4,137,0005,290,000 5,496,000 880,000 1,165,000 1,623,000 (2,994,000) 1,919,000 2,676,000 7,610,000 4,137,000 73% 10.09% 18.57% 51.90% 11,090,000 0 0 ense 1,053,000 991,000 4,137,000 4,137,000 74% 9.80% 4.55% 58.39% 75% 10.30% 6.66% 56.70%

Answer 1

Trends apparent in the last three years:

1. The net revenue increased from 40.9 Million to 42.2 Million which is an increase of 3.18% over the three year period.

2. The cost of goods sold remained constant and hence the gross profit increased from 29.8 million to 31.1 Million, an increase of 4.36% which is a higher increase than the revenue.

3. Therefore the company did well in manufacturing since the increase in gross profits was higher than the increase in revenues

4. However the company was not able to translate these into operational profits due to higher Sales and admin expenses. Hence the operational profits dipped over the three year period

5. The net income was reduced further due to increase in interest expense. Hence the company should reduce the debt level to reduce interest expense and improve the net income and net profit margins.