C e.mheducation.com/hmtpx Required 1. Complete the vertical analysis by computin

ID: 2410718 • Letter: C

Question

C e.mheducation.com/hmtpx Required 1. Complete the vertical analysis by computing each missing line item as a percentage of sales revenues. (Round your answers to the nearest whole percent.) NORTHEAST AIRLINES Income Statement (summarized) For the Year Ended December 31 in millions of U.S. dollars) 2013 2012 1001% Sales Revenues Salaries and Wages Expense Fuel, Oil, Repairs, and Maintenance Other Operating Expenses Other Expenses (Revenues) Income befare Income Tax Expense Income Tax Expense Net Income S 17,821 4,955 6,956 4,662 63 1,185 446 $739 100%! $ 17,300 4,829 7,369 4,577 (50) 575 388 %187 28 26 2. Does the pecentage that you calculated in Fuel, Oil, Repairs, and Mainteace suggest that the decline in fuel costs in 2013 contributed to an increase in Northeast's profit by cutting repairs and maintenance costs in 2013 compared to 2012? Yes No 3. Is Northeast's net profit margin improving or declining from 2012 to 2013? O 10:22 PM 147 lype hene to search

Explanation / Answer

NORTHEAST AIRLINES

INCOME STATEMENT (SUMMARISED)

FOR THE YEAR ENDED DECEMBER 31

(IN MILLIONS OF U.S. DOLLARS)

2013 2012

SALES REVENUES

$17,821

100

$17,300

100

SALARIES AND WAGES EXPENSE

$4,955

$4,829

FUEL, OIL, REPAIRS, AND MAINTENANCE

$6,956

$7,369

OTHER OPERATING EXPENSES

$4,662

$4,577

OTHER EXPENSES(REVENUES)

$63

($50)

INCOME BEFORE INCOME TAX EXPENSE

$1,185

$575

INCOME TAX EXPENSE

$446

$388

NET INCOME

$739

$187

2. YES

BECAUSE THE % OF FUEL, OIL, REPAIRS, AND MAINTENANCE IN 2013 IS 39% OF SALES REVENUES AS COMPARED TO 43% OF SALES REVENUES IN 2012 WHICH MEANS THERE IS A DECLINE IN COST IN 2013 LEADING TO AN INCREASE OF PROFIT MARGIN IN 2013.

3. IMPROVING

BEACAUSE IN 2012 THE PROFIT MARGIN WAS 1% AND IT GOT INCREASED TO 4% IN 2013. THUS, IMPROVING THE NET PROFIT MARGIN FROM 2012 TO 2013.