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Take a look a this companies projected profit and loss. Analyze and describe the health of the company. 2020 2021 2022 Revenue $681,720 $1,940,280 $3,198,790 Direct Costs...

Take a look a this companies projected profit and loss. Analyze and describe the health of the company.

2020

2021

2022

Revenue

$681,720

$1,940,280

$3,198,790

Direct Costs

Gross Margin

$681,720

$1,940,280

$3,198,790

Gross Margin %

100%

100%

100%

Operating Expenses

Salaries & Wages

$288,000

$293,760

$299,636

Employee Related Expenses

$57,600

$58,752

$59,927

Buffalo Hospital Supply

$60,000

$60,000

$60,000

Fountain Plaza Furnished Office including Utilities Rental ($750 ea. for two office spaces)

$18,000

$18,000

$18,000

Research and Development

$24,000

$24,000

$24,000

Legal and Professional Services

$10,200

$10,200

$10,200

Accountant Fees

$12,000

$12,000

$12,000

Marketing & Website

$12,000

$10,000

$8,000

Insurance

$24,000

$24,000

$24,000

Travel

$15,000

$15,000

$15,000

Supplies

$9,600

$9,600

$9,600

Depreciation

$26,760

$26,760

$26,760

Amortization of Other Current Assets

$96,000

$96,000

Total Operating Expenses

$557,160

$658,072

$663,123

Operating Income

$124,560

$1,282,208

$2,535,667

Interest Incurred

$0

$0

$0

Depreciation and Amortization

Income Taxes

$24,912

$256,442

$507,133

Total Expenses

$582,072

$914,514

$1,170,256

Net Profit

$99,648

$1,025,766

$2,028,534

Net Profit / Sales

15%

53%

63%

0 0
ReportAnswer #1

1) There are no direct cost to the company and more than half of the expenditure in 2020 is towards salaries and wages which implies that the company is Service oriented.

2) The P&L of 2020 seems to be healthy and with 15% of net profit. It implies that the company is operating well with good control over the expenses.

3) However in the revenue seems to increase substantially by 1.84 times in 2021 and 0.65 time in 2022 to the revenue in previous years. Which implies that the company was newly incorporated in 2020 and it is expecting a huge increase in revenue.

But revenue more than doubling within a year is not a achievable target for most cases and it implies that the company is projecting its revenue very high.

4) Also the major expense to the company i.e., salaries and wages have not increased in proportion to the sale turnover. It clearly implies that the company is over projecting its revenue.To increase the revenue one should either invest in manpower or technology . There is no increase in depreciation either.

(No details of amortization of 96000 are available in the question which might be for a software or any other intangible asset)

5) The net profit of 53% and 63% also seems very high.  

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