Q2: Dell Company\'s Income Statement at the end of year as follow: Sales Cost of

ID: 2601376 • Letter: Q

Question

Q2: Dell Company's Income Statement at the end of year as follow: Sales Cost of goods sold operating expenses Interest expenses Income taxes Total expenses Net income 2010 100,000 40,000 20,000 5,000 2,000 67,000 33,000 2011 160,000 70,000 40,000 6,000 3,000 119,000 41,000 2012 200,000 90,000 50,000 5,000 3,000 148,000 52,000 Instruction: analyze Dell Company's sales over the period 2010 2012 using Number-Index Trend analysis and evaluate the situation of the company .( show in your answer all calculations you need)

Explanation / Answer

Note:

As per requirement of the question, I am only doing number-index trend analysis for sales because you asked for analyze Company’s sales over the period 2010 -12.

Year

Sales

Trend index

2010

100000

100

2011

160000

160

2012

200000

200

After checking number trend index of sale over 2010 – 12, it is clear that Dell Company’s sale is showing increasing trend because trend index in 2010 is 100 whereas in 2011 it has reached to 160 that means sale has been increased by 60% in 2011 in compare to sale of 2010. So it is a positive signal for the company or it may be due to several factors like; low sale price, high quality etc.

In 2012 sale trend index increased to 200 that means sale is double in this year in compare to 2010 but as we have already seen that increase rate in 2011 was 60% but in 2012 it is 40% in compare to 2011, hence it is a question of worry also because rate of increase in sale have been reduced although total sale has been increased. Thus there may be several reasons for decrease in sale rate like; more competition in market, low income of the buyers, low level of the quality, less focus on advertising etc.

Working Note;

Trend index for sales are calculated as follow;

2010 is a base year hence 100 is taken for the base year.

For 2011;

160000 * 100 / 100000 = 160

For 2012;

200000 * 100 / 100000 = 200