Question

(b) Analyze the changes in gross profit margin for all three years. gluss prunt margin for LA Theatres Inc. for all three years. 3.15. Writing Skills Problem Income statements are presented for the Elf Corporation for the years ending December 31, 2016, 2015, and 2014. Elf Corporation Income Statements for the Years Ending December 31, 2016, 2015, and 2014 (in millions) Sales Cost of goods sold Gross profit Operating expenses 2016 2015 2014 $700 350 $350 $650 325 $325 $550 275 $275 Administrative 100 50 $200 70 100 75 $150 50 100 75 $100 30 Advertising and marketing Operating profit Interest expense Earnings before tax Tax expense (50%) Net income 65 $ 65 $130 $100 70 35 $ 35 50 $ 50 Required: Write a one-paragraph analysis of Elf Corporation's profit performance for the period To the Student: The focus of this exercise is on analyzing financial data rather than simply describing the numbers and trends. Analysis involves breaking the information into parts tor study, relating the pieces, making comparisons, drawing conclusions, and evaluating cause and effect.

Answer 1

Answer:-

In the current scenario,cost of manufacturing has been consistent so the GP ratio has also remained unchanged.

Operating profit in the year 2016 has increased due to increase in sale and also decrease in advertising expenses.

Elf Corporation''s sales have increased despite decrease in advertising expense meaning the product has been well known in the market now due to advertising in the last 2 years.

Also the product may be giving the expected results to the customer so they are being loyal to it.

Interest expense of the company has increased reason being as the company is increasing its sales it would require more capital to manufacture the product.So it may have borrowed funds from market.There is a constant relationship between increase in sales and increase in interest expense I.e.,as sales increase by $100 interest expense increase by $ 20.