Based on the below simplified income statements, which Company had the better year.. . and why?
A | B | C | |
Sales | 100 | 105 | 90 |
Cost of Goods Sold | 75 | 50 | 80 |
Gross Income | 25 | 55 | 10 |
Operating Expense (Selling, R&D, Admin) | 10 | 30 | 20 |
Earnings Before Interest & Taxes (EBIT) | 10 | 25 | -10 |
Interest Expense | 1 | 20 | 0 |
Extraordinary income/(Expense) | 0 | 0 | 25 |
Tax | 2 | 2 | 0 |
Net Income | 7 | 3 | 15 |
Company A had the better year, because this company has been able to report a higher amount of net income which is without consideration of extraordinary income and this company has been able to keep the operating income to a very lower level and it has also been able to keep Interest expense to a very lower level because debt capital would have been lower in the overall capital structure.
When other companies are concerned, Company C, did not had a good year because it has made loss before it has adjusted sale for extraordinary income whereas, company B has a large amount of tax as well as interest expense so company A is performing the best among all this company
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