January 08, 2013

Kaley's Knits: The Profit And Loss Statement

Yesterday, we saw that top-line demand is growing, nicely.  Life is good, right?

I like to see at least four years of financial results, three years at minimum.  We get an opportunity to see just how healthy a business is.  A table, such as the table illustrated below, should be part of Analytics 101 training and Executive Management 101 training.
Oh, no.

Demand increased from $17.8 to $20.1 million over the past four years.

Earnings Before Taxes decreased, from $2.2 million four years ago to $1.5 million today.

In other words, this business is struggling, struggling badly, right?

Here's your homework assignment for today - which lines in the profit and loss statement illustrate why this business is struggling to produce profit?