Analysis of Chemalite, Inc. Income Statement
Chemalite, Inc. is showing Positive Earnings. High gross profit (revenues- cost of goods sold) is first indicator of positive earnings. The income statement clearly shows that the earnings grew. The Gross margin Ratio (Gross profit/ Revenues) for Chemalite, Inc. is zero.
The gross profit is very high and this shows that the company has high profit performances. This is also reflected in the operating income which shows the amount of money that the company has generated from its operations. The interest expense of Chemalite is very low and this reveals that the company paid less on their debts. That is, Chemalite borrowing rates was very low since it generated a huge amount in its operations as reflected in the operating income. The value of net income before and after taxes is the same. This implies that the company did not incur any income tax expense. In other words, most of the items/goods sold by Chemalite Inc. are not tax-deductibles. The income statement reveals that Chemalite Inc. is very productive.
The balance sheet below shows that the company did not have accrued liabilities in other words; the company did borrow any money to meet its financial needs. The balance sheets reveals the financial status of a company in terms of how much money it owes, how much it has, and share of the stockholders. There are no current liabilities which show that the company won’t suffer a cash shortage during the next year. The company show high levels of retained earning which shows that the company is operating at high profits.
However, it should be noted that the company has high Accumulated Depreciations as well as Amortisation which are red indicators that fixed assets are ageing. Therefore, the actual book value of Property, Plant and Equipment is 201 875. The actual value of fixed assets would then be $301, 875 instead of the indicated 312, 500.