Discussion 1

Attached.

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

  100

  100

    50

$100

    50

(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
Advertising and marketing			50	75	75
Operating profit	$200	$150		$100
Interest expense	70	30
Earnings before tax	$130	$  70
Tax expense (50%)	65	35
Net income	$  65	$  50	$  35