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RS DB 2 - Research Paper Example

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RS DB 2

Revenue for sales is always associated with expenses. The common expenses are cost of revenue or cost of goods sold, general and administrative expenses, non-recessing expenses, and other expenses. The above-mentioned expenses when added to the revenue we get gross profit or loss, and operating income or loss. This assignment will limit to Radio Shacks sales revenue. The activities mentioned above are operating activities. Operating activities in business are associated with the revenue and expenses or in other word cash inflows and outflows. Thus, operational activity in accounting is called cash flow. This assignment will limit to the study of Radio Shack’s cash flow from the operation in the fiscal 2010 year. Cash flow from operations may be calculated using direct or indirect method. This assignment will use the indirect method. Necessary data, in this purpose, will be acquired from company’s Income statement and Balance sheet (Yahoo; YCHARTS). Sales Revenue for year 2010 = 4,265,200,000 (Yahoo) Cash at the beginning of the year 2010 = 908,200,000 (YCHARTS a) Operating Cash Flow (OCF) calculation (Accounting Explained) Net income 190,700,000 Adjustment to the net income 38,600,000 Depreciation 99,200,000 Net payable 600,100,000 Deferred Tax 12,000,000 Net Receivable -377,500,000 OCF 563,100,000 Cash at the end 2010 = Cash at the beginning + OCF = 908,200,000 + 563,100,000 = 1,471,300,000 However, according to the company Cash flow (YCHARTS a) statement, cash at the end of 2010 was 569,400,000. This shows that company did not collect all revenue, which is also shown through the increase in receivable from 2009 to 2010 (YCHARTS b). The company made more sales than cash collections. Question 2 Sales revenue and Net income trend analysis Radio Shack 2008 2009 Growth / Decline 2010 Growth / Decline 2011   Sales 4,224,000,000 4,276,000,000 1.23% 4,266,000,000 -0.23% 4,378,000,000 2.63% Net income 189,400,000 205,000,000 8.24% 206,100,000 0.54% 72,200,000 -64.97% Cost of revenue 2,302,000,000 2,314,000,000 0.52% 2,352,000,000 1.64% 2,567,000,000 9.14% Gross profit 1,923,000,000 1,962,000,000 2.03% 1,914,000,000 -2.45% 1,811,000,000 -5.38% BestBuy Sales   45,020,000,000   49,690,000,000 10.37% 49,750,000,000 0.12% Net income   1,003,000,000   1,317,000,000 31.31% 1,277,000,000 -3.04% The above table shows Radio Shack’s Sales and Net income trend for years from 2008 to 2011. Revenue from sales during this period was more or less stable; though in 2009, it was increased by 1.23 % with respect to the previous year; in 2010 decreased by – 0.23 %, and in 2011 again increased by 2.63 %. Net income trend was quite erratic; in 2009, it increased by 8.24 % with respect to the previous year, then it dropped in 2010. In 2011 net income dropped by 65 % with respect to the previous year. The company Income Statement did not show any dramatic increase in operating expenses. However, it was observed that both in 2010 and 2011 when net income dropped gross profit also dropped. Drop in net income in 2010 and 2011 should be attributed to decrease in gross profit. The decrease in gross profit is associated with the increase in cost of revenue, which is displayed in the above table. Study of net income of Radio Shack’s competitor Best Buy also shows a decrease in net income in 2011 with respect to 2011. We may conclude that year 2011 decrease in net income as a trend; however, Radio Shack’s net income drop in 2011 was much higher than its competitor Best ...Show more

Summary

Finance and Accounting Institution Finance and Accounting Question 1. Did Radio Shack had more Sales Revenue or collected Cash more than Sales Revenue in 2010 The concept revenue from sales implies amounts of goods or service sold in a specific period…
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