Knowing how the various sections of the company are functioning will help the manager identify where the company is strong, where it is weaker, and what things the manager can improve. This should assist the manager in managing the company performance in a proactive and effective manner. The following is an extract of Adidas Consolidated Income Statement for the year ending 31 December 2020:Based on the information given, it can be seen that the company's performance decreased compared to the previous year. If the HQ decides to close one of its branchesa)EXPLAIN THREE (3) reasons why the company should not make the decision solely based on the financial report producedb). Instead of focusing on the financial aspect when making a decision, EXPLAIN TWO Non-financial aspects that the HQ should consider in making their decision that could help them in maximizing their productivity and profit CONSOLIDATED INCOME STATEMENTadidas AG Consolldated Income Statement (IFRS) € in millonsYear endingDec. 31, 2020Year endingDec. 31, 2019NoteChangeNet sales3819,84423,640(16.1%)Cost of salesGross profit(12.0%)(19.8%)9,99011,3479,85512,293(% of net sales)(2.3pp)(46.2%)49.7%52.0%Royalty and commission income83154Other operating income314256(24.5%)Other operating expenses11, 14, 32, 339,2299,843(6.2%)(% of net sales)46.5%41.6%4.9ppMarketing and point-of-sale expenses(% of net sales)Distribution and selling expenses2,5733,042(15.4%)13.0%12.9%0.1pp(0.7%)4.9624.9971% of net sales)25.0%3.9pp(11.6%)21.1%General and administration expenses1,4611,652(% of net sales)7.4%7.0%Sundry expenses(% of net sales)0.4pp(11.6%)0.0pp1191340.6%0.6%Impairment losses (net) onaccounts receivable and contract assets11418541.8%Operating profit(% of net sales)Financial incomeFinancial expensesIncome before taxes7512,660(71.8%)3.8%11,3%(7.5pp)342964(55.2%)3420416623.2%5752,558(77.5%)(% of net sales)2.9%10.8%(7.9pp)Income taxes36146640(77.2%)(% of income before taxes)Net income from continuing operations25.4%25.0%0.3pp4291,918(77.6%)(% of net sales)2.2%8.1%(6.0pp)Gain from discontinued operations, net of tax031359(77.5%)Net income4431,977(77.6%)

Making decisions about improving the profitability of a firm is an important task of the management.…

Answered: nowing how the various sections of the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Knowing how the various sections of the company are functioning will help the manager identify where the company is strong, where it is weaker, and what things the manager can improve. This should assist the manager in managing the company performance in a proactive and effective manner. The following is an extract of Adidas Consolidated Income Statement for the year ending 31 December 2020:

Based on the information given, it can be seen that the company's performance decreased compared to the previous year. If the HQ decides to close one of its branches

a)EXPLAIN THREE (3) reasons why the company should not make the decision solely based on the financial report produced

b). Instead of focusing on the financial aspect when making a decision, EXPLAIN TWO Non-financial aspects that the HQ should consider in making their decision that could help them in maximizing their productivity and profit

CONSOLIDATED INCOME STATEMENT
adidas AG Consolldated Income Statement (IFRS) € in millons
Year ending
Dec. 31, 2020
Year ending
Dec. 31, 2019
Note
Change
Net sales
38
19,844
23,640
(16.1%)
Cost of sales
Gross profit
(12.0%)
(19.8%)
9,990
11,347
9,855
12,293
(% of net sales)
(2.3pp)
(46.2%)
49.7%
52.0%
Royalty and commission income
83
154
Other operating income
31
42
56
(24.5%)
Other operating expenses
11, 14, 32, 33
9,229
9,843
(6.2%)
(% of net sales)
46.5%
41.6%
4.9pp
Marketing and point-of-sale expenses
(% of net sales)
Distribution and selling expenses
2,573
3,042
(15.4%)
13.0%
12.9%
0.1pp
(0.7%)
4.962
4.997
1% of net sales)
25.0%
3.9pp
(11.6%)
21.1%
General and administration expenses
1,461
1,652
(% of net sales)
7.4%
7.0%
Sundry expenses
(% of net sales)
0.4pp
(11.6%)
0.0pp
119
134
0.6%
0.6%
Impairment losses (net) on
accounts receivable and contract assets
114
18
541.8%
Operating profit
(% of net sales)
Financial income
Financial expenses
Income before taxes
751
2,660
(71.8%)
3.8%
11,3%
(7.5pp)
34
29
64
(55.2%)
34
204
166
23.2%
575
2,558
(77.5%)
(% of net sales)
2.9%
10.8%
(7.9pp)
Income taxes
36
146
640
(77.2%)
(% of income before taxes)
Net income from continuing operations
25.4%
25.0%
0.3pp
429
1,918
(77.6%)
(% of net sales)
2.2%
8.1%
(6.0pp)
Gain from discontinued operations, net of tax
03
13
59
(77.5%)
Net income
443
1,977
(77.6%)

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