MBA 2-3 Common-sized income statements Obj. 6Describe and illustrate the use of
ID: 2328486 • Letter: M
Question
MBA 2-3
Common-sized income statements
Obj. 6Describe and illustrate the use of common-sized income statements in assessing a company's performance.
Delta Air Lines, Inc. (DAL) provides cargo and passenger services throughout the world. The following operating data (in millions) were adapted from recent financial statements of Delta.
Prepare common-sized income statements for Years 1 and 2. Round to one decimal place.
Using your answer to (1), analyze and comment on the performance of Delta in Year 2.
Explanation / Answer
Answer)
Using the above data of Delta airlines, operating income in the year 2 is reduced from 9% to 5.46% as compared to year 1. As there has been the increase in revenue for the year 2 but operation expenses also increase from 90.99% to 94.53% which has the impact on overall operating income. The main reason for the increase in the operating expenses is the rising fuel cost in the two years.
Particulars Year 1 year 2 common size percentage year 1 common size percentage year 2 Revenue $37773 $40362 100% 100% Operating expenses: Fuel ($9397) ($11668) 24.88% 28.91% Aircraft related ($13225) ($13070) 35.01% 32.38% Selling and general ($9829) ($10905) 26.02% 27.08% other expenses ($1922) ($2513) 5.09% 6.22% total operating expenses ($34373) ($38156) 90.99% 94.53% operating income $3400 $2206 9.00% 5.46% 4Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.