Pacioli Wholesale Corporation Income Statement and Analysis of Ret ✓ Solved
Replace the heading with your company's name and years covered by the Income Statement. Replace each of the xxx's with your values or zero, and the statement values will be calculated. Replace the xxx's in Row 10 with the number of shares of common stock outstanding for your years 2018: xxx 2017: xxx.
Paper For Above Instructions
This paper aims to analyze the Income Statement and Retained Earnings for Pacioli Wholesale Corporation covering the fiscal years ending June 30, 2018, and June 30, 2017. The Income Statement reflects a comprehensive overview of financial performance, detailing revenues, expenses, and the eventual net income, which is paramount for assessing the company's financial health. Additionally, an analysis of retained earnings captures how profits are allocated or reinvested in the company, thereby helping stakeholders understand the company's long-term sustainability and growth potential.
Income Statement for Pacioli Wholesale Corporation
For the Years Ending June 30, 2018 and June 30, 2017
| Item | 2018 | 2017 |
|---|---|---|
| Sales | $1,222,750 | $1,200,000 |
| Less Cost of Goods Sold | $545,000 | $540,000 |
| Gross Profit | $677,750 | $660,000 |
| Operating Expenses | ||
| Selling Expenses | $20,000 | $15,000 |
| Administrative Expenses | $50,000 | $45,000 |
| Total Operating Expenses | $70,000 | $60,000 |
| Operating Income | $607,750 | $600,000 |
| Interest Expense | $36,000 | $35,000 |
| Income Before Taxes | $571,750 | $565,000 |
| Income Taxes | $87,900 | $85,000 |
| Net Income | $483,850 | $480,000 |
| Earnings Per Share (Common) | $1.21 | $1.20 |
| Dividends | $100,000 | $90,000 |
| Addition to Retained Earnings | $383,850 | $390,000 |
Analysis of Retained Earnings
The analysis of retained earnings reveals the portion of the net income that is retained in the company rather than paid out as dividends. The retained earnings at the beginning of the year for 2018 amounted to $100,000. After adding the net income of $483,850 and subtracting the dividends of $100,000, the retained earnings as of June 30, 2018, would be $483,850.
Review of Financial Performance
Pacioli Wholesale Corporation has demonstrated a steady growth trajectory over the past two years. The gross profit margin has remained robust, with a slight increase from the previous year. The operating income showcases effective management of operating expenses, resulting in a significant yet manageable expense ratio.
Recommendations for Improvement
To further strengthen its financial position, Pacioli Wholesale Corporation should consider the following:
- Increasing marketing efforts to boost sales even further and tap into new markets.
- Periodic reviews of operating expenses to identify potential savings without compromising service quality.
- Continually assess the pricing strategies relative to costs and competitor pricing.
- Enhancing customer service and engagement to foster long-term loyalty.
Conclusion
In summary, the analysis of the Income Statement and Retained Earnings for Pacioli Wholesale Corporation indicates a positive outlook for the company’s financial performance. While there are areas that need improvement, such as expense management and marketing, the company is on a solid path of growth in profitability and retained earnings.
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