Discussion Assignment Unit 1 Find and review the financial statements of two companies that are in the retail industry. Compare their financials and discuss the similarities and differences you see in the statements. In this discussion assignment I have been tasked with finding and reviewing the financial statements of two companies in the retail industry – and subsequently discussing the similarities and differences that I can see in the statements. Before embarking on this research and analysis, it is important to define what we mean by financial statements and how they can be commonly identified. According to Collins (2016), accountants typically prepare four financial statements: Income Statement, Statement of Owner’s Equity, Balance …show more content…
Understanding of this can be reached by looking at the final Net Income figure which will be shown as profit or loss in brackets. The Net Income figure is reached by listing total Sales, less costs of goods sold, to reach Gross profit. Next the income statement lists total Operating Expenses (e.g. salaries, depreciation, advertising and other expenses) which are subtracted from Gross Profit to reach Operating Income. Next, Interest Expense is listed and subtracted from Operating Income to reach Net Income before taxes. Finally, Income taxes are showed and subtracted from Net Income before taxes to reach the Net Income figure. The Statement of Owner’s Equity reports changes in owner’s equity over a specific period of time. For example, the net income shown in the income statement during a fiscal year would be added to the owner’s equity (how much the owner has invested personally in the business) at the end of that fiscal year. Thirdly, the Balance Sheet demonstrates an organization’s assets, liabilities and owner’s equity – where the total assets are understood to be either from loans (liabilities) or from investments made by owners (its owner’s …show more content…
Lego reports a smaller than expected profit which represents an increase on the previous year, whilst M&S reports a significant slump in net income from GBP 404.4m the previous year to GBP 115.7m (due to costs implementing new pay and pensions arrangements, and the high cost of international store closures). There are similarities and differences between The Statements of Owner’s Equity for both companies. Both are called Consolidated Statement of Comprehensive Income and both show a decrease. M&S shows a decrease of GBP600m from the previous year (poor sales). For Lego there is also a decrease of DKK200m against the previous year but for different reasons (reclassification of cash flow hedges from equity to be recognised as part of revenue in the income statement, market value of cash flow hedges, currency translation differences, and remeasurements of defined benefit plans). The Balance Sheet information for Lego shows assets increased by DKK 2.0 billion in 2016 and amount to DKK 29.9 billion against DKK 27.9 billion at the end of 2015. For M&S, however, the Balance Sheet shows a small decrease in assets on the previous