Introduction
Common size statements are financial statements that are prepared in terms of ratios which are used to give important information pertaining the performance of the company and change on company returns (CFA Institute, 2008). This statement enables corporate managers to know the causes of changes in profitability of the company (Mirza, Orrell & Holt, 2008).
Nokia Corporation
Common Size Income Statement
For the Last Quarter of 2001, 2002 and 2003, 2004
2001 2002 2003 2004
Sales 100% 100% 100% 100%
Less (-) returns inwards (0) (0) (0) (0)
Net Sales 100% 100% 100% 100%
Purchases 72 70 75 74
Add (+) Opening Inventory 0 0 0 0
Less (-) closing stock (6) (3) (7) 10
Cost of goods sold (66) (67) (68) (64)
Gross Profit 34 33 32 36
Less (-) Expense
Research and development expenses (11) (10) (8) (13)
Selling and administrative expenses (6) (5) (10) (7)
Profit before tax, depreciation and interest 17 18 14 16
Less (-) Income tax (3) (4) (1) (2)
Less (-) Depreciation (2) (3) (2) (1)
Less (-) Income tax expense (1) (2) (3) (2)
Less (-) Minority interest (0.2) (0.1) (0.5) (0.3)
Profits from continuing operations 10.8 8.9 7.5 10.7
Discontinued operations (0.8) (0.9) (0.5) (0.4)
Net Profit 10 8 7 10.3
Preferred stock dividends (1.5) (0.5) (1.6) (1.7)
Net Profit Margin 8.5 7.5 5.4 8.6
Nokia Corporation
Consolidated Statement of Financial Position
For the Last Quarter of 2001, 2002 and 2003, 2004
2001 2002 2003 2004
Assets
Intangible assets 500 530 600 640
Plant and equipment 700 450 256 330
Building and machinery 540 433 540 540
Total non current assets $1740 $ 1413 $1396 $1510
Inventories 450 550 300 500
Account receivables 340 450 400 335
Cash and cash equivalent 255 600 740 550
Short tem investments 1500 1400 1522 1654
Total current assets $2,545 $3,000 $2,962 $3039
Total Assets $4,285 $4,413 $4,358 $4,549
Shareholders Equity
Share Capital 1100 1150 1300 1200
Restricted Equity 240 350 310 243
Untaxed Reserves 120 150 175 200
Retained Earnings 300 150 200 140
Treasury Shares 400 420 230 350
Total Shareholders Equity $ 2,160 $2,220 $2,215 $2,133
Liabilities
Long-term debt 1000 1150 1160 1200
Other long-term liabilities 200 100 120 160
Total long tem liabilities $1,200 $1,250 $1,280$ 1,360
Short term debts 635 648 623 801
Account payable 120 130 100 110
Accrued expenses 60 55 105 100
Prepayments 110 110 35 45
Total Current Liabilities $925 $943 $863 $1056
Total Equities $4285 $4,413 $4,358 $4,549
Computation of Financial Ratios
(a)Working Capital Ratios
(i) Current Assets = Net Sales
Average Current Assets
100÷288650=0.000346440×100
=0.034644%
(ii)Accounts Receivable Turnover= Net Sales
Average Account Receivable
100 ÷38125=0.002623×100
=0.2623%
(iii)Account Receivable Collection Period= 365Days
A/c Receivable Turn over 365÷0.2623
=1391.54 Periods
(iv)Inventory Turnover = Cost of Goods Sold
Average Closing Stock
= 66.25÷6.5
=10.19×100
=1019%
(b)Noncurrent Asset Ratios
(v)Noncurrent Asset Turnover= Net Sales
Average Noncurrent Assets
= 100÷151475
=6.6017×100
=660.17%
(vi) Plant and Equipment Turnover= Net Sales
Average Plant and Equipment
= 100÷43400
=0.002304×100
=0.2304%
Implication of the Findings
The herein common size income statement reveals that, Nokia net profit margin has been fluctuating significantly for four periods under investigation. Between 2001 to 2002 there was a 1% decrease in net profit margin and between 2002 to 2003 there was a 3.2% increase in net profit margin. The above fluctuation may be attributed to changes in cost of goods sold as well as well as changes in variable expenses such as selling and administrative expense (Ferris & Petitt, 2002).The turnover ratios of has been at an increase from 2001 to 2004 this can be attributed to improvement in management strategies of the company. Connectively, there has been a negative improvement in efficiency of Nokia Company with respect to plant and equipment ratio.
Conclusion
Therefore, financial managers of Nokia Company should try to reduce the variable cost such as selling and administrative and cost of goods sold in order to increase the profitability of the company.
Our Service Charter
-
Excellent Quality / 100% Plagiarism-Free
We employ a number of measures to ensure top quality essays. The papers go through a system of quality control prior to delivery. We run plagiarism checks on each paper to ensure that they will be 100% plagiarism-free. So, only clean copies hit customers’ emails. We also never resell the papers completed by our writers. So, once it is checked using a plagiarism checker, the paper will be unique. Speaking of the academic writing standards, we will stick to the assignment brief given by the customer and assign the perfect writer. By saying “the perfect writer” we mean the one having an academic degree in the customer’s study field and positive feedback from other customers. -
Free Revisions
We keep the quality bar of all papers high. But in case you need some extra brilliance to the paper, here’s what to do. First of all, you can choose a top writer. It means that we will assign an expert with a degree in your subject. And secondly, you can rely on our editing services. Our editors will revise your papers, checking whether or not they comply with high standards of academic writing. In addition, editing entails adjusting content if it’s off the topic, adding more sources, refining the language style, and making sure the referencing style is followed. -
Confidentiality / 100% No Disclosure
We make sure that clients’ personal data remains confidential and is not exploited for any purposes beyond those related to our services. We only ask you to provide us with the information that is required to produce the paper according to your writing needs. Please note that the payment info is protected as well. Feel free to refer to the support team for more information about our payment methods. The fact that you used our service is kept secret due to the advanced security standards. So, you can be sure that no one will find out that you got a paper from our writing service. -
Money Back Guarantee
If the writer doesn’t address all the questions on your assignment brief or the delivered paper appears to be off the topic, you can ask for a refund. Or, if it is applicable, you can opt in for free revision within 14-30 days, depending on your paper’s length. The revision or refund request should be sent within 14 days after delivery. The customer gets 100% money-back in case they haven't downloaded the paper. All approved refunds will be returned to the customer’s credit card or Bonus Balance in a form of store credit. Take a note that we will send an extra compensation if the customers goes with a store credit. -
24/7 Customer Support
We have a support team working 24/7 ready to give your issue concerning the order their immediate attention. If you have any questions about the ordering process, communication with the writer, payment options, feel free to join live chat. Be sure to get a fast response. They can also give you the exact price quote, taking into account the timing, desired academic level of the paper, and the number of pages.