Net sales increased 139.1% from 2001 to 2002. This significant increase in sales also led to increases in cost of goods sold (144.6%), gross profit (116.3%), and general and administrative expenses (93.8%). While advertising expenses more than quadrupled (455.2%), this large increase is likely not sustainable long-term. The increases in expenses resulted in income from operations and net income rising but at lower rates than the net sales increase (85.6% and 16.1% respectively).

1. .
2002
2001
'01 to '02
.
$
% of Sales
$
% of Sales
% increase

2. Net sales
62349545
26072585
139.1%

3. Cost of Goods Sold
51402174
82.4%
21010605
80.6%
144.6%
Gross Profit
10947371

4. 17.6%
5061980
19.4%
116.3%

5. Advertising
1818126
2.9%
327479
1.3%
455.2%
General & Administrative
8067331
12.9%

6. 4162408
16.0%
93.8%
Total Operating Exp
9885457
15.9%
4489887
17.2%
120.2%

7. Income from Operations
1061914
1.7%
572093
2.2%

8. 85.6%
Interest Income
17977
0.0%

9. 16237
0.1%
10.7%
Gain on Marketable Securities
0.0%
41962
0.2%
-100.0%
Interest Expense

10. -2400
0.0%
-3184
0.0%
-24.6%
Total Other
15577
0.0%
55015

11. 0.2%
-71.7%
Income Before Taxes
1077491

12. 1.7%
627108
2.4%
71.8%

13. Taxes
536143
0.9%
161000
0.6%
233.0%

14. Net Income
541348
0.9%
466108
1.8%
16.1%
Consider the following questions in your evaluation:

15. What was the percentage increase in sales from 2001 to
2002?
What impact did the new sales have on the gross profit?
Were the new sales more or less profitable sales based upon
their impact on the gross profit?
What happened to the advertising expenses ($ & %)?
Is the change in advertising likely to be long term? Why?
What impact did the new sales have on G&A (General &
Administrative)? Why?
Are total operating expenses up or down as a percentage?
What impact does the change in operating expenses have on
the bottom line?
Is income from operations up or down ($ & %)?
Is total other a significant dollar amount? Percentage
increase?
Look at the amount of taxes paid. Why is the change so
significant?
Compare the increases in sales to the increase in profit after
taxes. Was it worth it from an operations point of view? From
the stockholders point of view?