Question

From time to time, public companies will report a net loss when expenses and costs exceed revenue in an accounting period. For this discussion, research a company which has reported a net loss in one of the past three years. Briefly summarize the Management Discussion and Analysis section (or other applicable section) of the annual report whereby Management explains the loss.

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Answer 1

Dell Technologies a renowned name in the IT sector is suffering net losses in the last 5 years. The below snapshot is from the company's latest annual report and shows the selected financial data for the last 5 years. As evident from the below table, the losses of the company increased from the year 2014 to 2016 and have started coming down slightly over the last 2 years. The revenues of the company have been growing year on year. Correspondingly, the cost of revenues too is trending upwards with the increase in revenues but at a slower pace. This has resulted in improvement in gross margin in the last 3 years. It is the increase in operating expenses and particularly SG&A costs together with a reduction in income tax benefits which is eating into the profits and eventually resulting in Dell suffering a net loss.

February 1, 2019 February 2, 2018 Fiscal Year Ended February 3, 2017 (a) in millions, except per share data) January 29, 2016 (6) January 30, 2015 (b) Results of Operations and Cash Flow Data: Net revenue Gross margin Operating loss Loss from continuing operations before income taxes Loss from continuing operations 90,621 25,053 (191) (2,361) (2,181) $ $ $ $ $ 79,040 20,537 (2,416) (4,769) (2,926) $ $ $ $ 5 62,164 13,649 (2,390) (4.494) (3,074) $ $ $ $ $ 50,911 8,387 (514) (1,286) (1.168) $ $ $ $ $ 54,142 8,896 (316) (1,215) (1,108)