Income statements (in’000s) of Future Lifestyle and Arvind Lifestyle, the two top textile brands, are provided below. Future lifestyle profits declined in 2014-15. Although Arvind lifestyle posted loss in both periods, the loss has declined. Required: a. Examine the performance of Future Lifestyle for the two years and explain why profit has declined despite increase in revenue. b. Examine how the performance of Arvind Lifestyle for the two years and explain how Arvind lifestyle improved its performance. c. Compare the performance of the two companies for the year ending March 2015 and explain the differences in performance of the two companies. (Hint: Prepare common size income statement to analyse the cost structure of the two companies). Future Lifestyle Arvind Lifestyle March 2014 March 2015 March 2014 March 2015 INCOME Revenue 3122.86 3305.58 1764.95 2291.08 EXPENDITURE Raw Materials 1744.20 2069.12 1053.74 1297.29 Power and fuel cost 77.78 92.66 24.40 29.16 Employee Cost 129.09 169.19 128.14 158.84 Other expenses (Note 1) 589.43 622.71 546.13 696.25 Depreciation 385.19 170.09 58.51 68.22 Total expenditure 2925.67 3123.77 1810.92 2249.76 Profit before interest and taxes 197.19 181.81 -45.97 41.32 Interest 162.95 158.33 68.08 89.05 Profit before taxes 34.24 23.48 -114.05 -47.73 Tax 7.26 4.46 0.00 0.00 Deferred tax 3.70 0.47 -8.51 -15.40 Profit after taxes 23.28 18.55 -105.54 -32.33 Note 1: Details of other expenses Future Lifestyle Arvind Lifestyle March 14 March 15 March 14 March 15 Repairs 16.44 18.47 34.12 35.13 Rent, rates and taxes 298.52 354.22 153.38 179.40 Insurance 3.04 3.44 1.40 1.66 Advertisement 90.48 69.22 94.78 119.69 Audit expenses 0.57 0.69 0.40 0.57 Bad debts written off 0.56 6.73 2.33 0.01 Miscellaneous expenses 179.82 169.94 259.72 359.79 Total of other expenses 589.43 622.71 546.13 696.25

Income statements (in’000s) of Future Lifestyle and Arvind Lifestyle, the two top textile brands, are provided below. Future lifestyle profits declined in 2014-15. Although Arvind lifestyle posted loss in both periods, the loss has declined. Required: a. Examine the performance of Future Lifestyle for the two years and explain why profit has declined despite increase in revenue. b. Examine how the performance of Arvind Lifestyle for the two years and explain how Arvind lifestyle improved its performance. c. Compare the performance of the two companies for the year ending March 2015 and explain the differences in performance of the two companies. (Hint: Prepare common size income statement to analyse the cost structure of the two companies). Future Lifestyle Arvind Lifestyle March 2014 March 2015 March 2014 March 2015 INCOME Revenue 3122.86 3305.58 1764.95 2291.08 EXPENDITURE Raw Materials 1744.20 2069.12 1053.74 1297.29 Power and fuel cost 77.78 92.66 24.40 29.16 Employee Cost 129.09 169.19 128.14 158.84 Other expenses (Note 1) 589.43 622.71 546.13 696.25 Depreciation 385.19 170.09 58.51 68.22 Total expenditure 2925.67 3123.77 1810.92 2249.76 Profit before interest and taxes 197.19 181.81 -45.97 41.32 Interest 162.95 158.33 68.08 89.05 Profit before taxes 34.24 23.48 -114.05 -47.73 Tax 7.26 4.46 0.00 0.00 Deferred tax 3.70 0.47 -8.51 -15.40 Profit after taxes 23.28 18.55 -105.54 -32.33 Note 1: Details of other expenses Future Lifestyle Arvind Lifestyle March 14 March 15 March 14 March 15 Repairs 16.44 18.47 34.12 35.13 Rent, rates and taxes 298.52 354.22 153.38 179.40 Insurance 3.04 3.44 1.40 1.66 Advertisement 90.48 69.22 94.78 119.69 Audit expenses 0.57 0.69 0.40 0.57 Bad debts written off 0.56 6.73 2.33 0.01 Miscellaneous expenses 179.82 169.94 259.72 359.79 Total of other expenses 589.43 622.71 546.13 696.25

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Required:

a. Examine the performance of Future Lifestyle for the two years and explain why profit has declined despite increase in revenue.

b. Examine how the performance of Arvind Lifestyle for the two years and explain how Arvind lifestyle improved its performance.

c. Compare the performance of the two companies for the year ending March 2015 and explain the differences in performance of the two companies.

(Hint: Prepare common size income statement to analyse the cost structure of the two companies).

	Future Lifestyle	Arvind Lifestyle
	March 2014	March 2015	March 2014	March 2015
INCOME
Revenue	3122.86	3305.58	1764.95	2291.08
EXPENDITURE
Raw Materials	1744.20	2069.12	1053.74	1297.29
Power and fuel cost	77.78	92.66	24.40	29.16
Employee Cost	129.09	169.19	128.14	158.84
Other expenses (Note 1)	589.43	622.71	546.13	696.25
Depreciation	385.19	170.09	58.51	68.22
Total expenditure	2925.67	3123.77	1810.92	2249.76
Profit before interest and taxes	197.19	181.81	-45.97	41.32
Interest	162.95	158.33	68.08	89.05
Profit before taxes	34.24	23.48	-114.05	-47.73
Tax	7.26	4.46	0.00	0.00
Deferred tax	3.70	0.47	-8.51	-15.40
Profit after taxes	23.28	18.55	-105.54	-32.33

Note 1: Details of other expenses

	Future Lifestyle	Arvind Lifestyle
	March 14	March 15	March 14	March 15
Repairs	16.44	18.47	34.12	35.13
Rent, rates and taxes	298.52	354.22	153.38	179.40
Insurance	3.04	3.44	1.40	1.66
Advertisement	90.48	69.22	94.78	119.69
Audit expenses	0.57	0.69	0.40	0.57
Bad debts written off	0.56	6.73	2.33	0.01
Miscellaneous expenses	179.82	169.94	259.72	359.79
Total of other expenses	589.43	622.71	546.13	696.25

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.