Chapter 11
Financial Statement Analysis
575
AP-7B (
4
5
)
Presented below is the comparative income statement of JeansWear Company for 2016 and
2015.
JeansWear Company
Income Statement
For the Year Ended January 31
2016
2015
Sales
$184,794 $107,933
Cost of Goods Sold
115,550 69,022
Gross Profit
69,244 38,911
Operating Expenses
Advertising Expense
3,040
1,490
Bank Charges Expense
556
24
Communication Expense
5,050
3,927
Legal and Professional Expense
5,540
3,010
Utilities Expense
3,074
1,754
Rent Expense
3,430
3,430
Repairs and Maintenance Expense
3,810
2,670
Salaries andWages Expense
2,780
1,510
Transportation Expense
3,170
1,920
Interest Expense
1,343
579
Depreciation Expense
1,320
750
Total Operating Expenses
33,113 21,064
Operating Profit before Tax
36,131
17,847
Income Tax
10,839
5,354
Net Income
$25,292 $12,493
Required
a) Calculate the following ratios for both years.
2016
2015
EBIT Percentage to Sales
Interest Coverage Ratio
b) In which year does the company have a better performance with respect to the EBIT
Percentage to Sales calculated in part a)?
