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
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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

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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

 

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