A condensed income statement for Electronic Arts and a partially completed verti

Question

A condensed income statement for Electronic Arts and a partially completed vertical analysis follow Required: 1. Complete the vertical analysis by computing each missing line item as a percentage of net revenues TIP: Cost of Goods Sold was 37 percent of Net Revenues in 2013, which was computed as ($1,388 ÷ $3,797)-100. (If the percentage is a loss, enter the amount with a negative sign in front of it. Round your answers to the nearest whole percent.) ELECTRONIC ARTS, INC. Income Statement (summarized) For the Year Ended March 31 in millions of U.S. dollars) 2013 2012 1001% 37 Net Revenues Cost of Goods Sold Research and Development Expense Sales and Marketing Expense General and Administrative Expense Income (Loss) from Operations Other Revenue (Expenses) Income (Loss) before Income Tax Income Tax Recovery (Expense) Net Income (Loss) $ 3,797 1,388 1,153 788 347 121 18 139 (41) 98 $ 4,143 1,598 1,180 883 447 35 (17) 18 58 76 1001 % 39 28 21 4 21% 2. Does Electronic Arts' 2013 Cost of Goods Sold, as a percentage of Net Revenues, represent better or worse performance as compared to 2012? O Better 0 Worse

Explanation / Answer

1. ELECTRONIC ARTS INC.

INCOME STATEMENT (SUMMARIZED)

For the year ended March 31

(in millions of US dollars)

2. Electronic arts' 2013 Cost of goods sold, as a percentage of Net Revenues, represents better performance as compared to 2012. Cost has reduced from 39% to 37% from 2013 to 2012.

PARTICULARS 2013($) 2013(%) 2012($) 2012(%) Net Revenues 3,797 100 4,143 100 Cost of goods sold 1,388 37 1,598 39 Research and development expenses 1,153 30 1,180 28 Sales and marketing expenses 788 21 883 21 General and administrative expense 347 9 447 11 Income(Loss) from operations 121 3 35 1 Other revenue (expenses) 18 1 (17) Income (loss) before Income tax 139 4 18 1 Income tax recovery (expense) (41) (1) 58 1 Net Income (loss) 98 3 76 2 *-------------------------*----------------------*

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