Week 4 Checkpoint
Nov 15, 2012
Chapter 3, Page 111, Problem 3.16b
Eastman Kodak appears to be profitable even though their net income has decreased. They show an increase in sales since from 2002 to 2004, but their operating costs also increased by 15.3 % from 2002 to 2003. The increase in sales was primarily through acquisitions and the impact of foreign exchange rates on their holdings. Kodak’s largest holding, Digital and Film Imaging Systems, experienced a 1% decrease during this period. In a comparative analysis of the years 2003 and 2004, Kodak increased their current assets and decreased total assets. This reflects the disposal of assets such as equipment, plant and property, and complete discontinuance of certain operations. This decrease in total assets can be seen as a prudent move in their restructuring process. They also decreased their number of employees in 2004 and cut back on their advertising expense.
Kodak has decreased total liabilities by 4%. This is the result of decreases in short term and long term borrowings. By paying off debt, the company is improving its overall financial position. Kodak also sows a positive net profit margin even though they show a loss in 2004. Kodak’s other income in 2004 resulted from settlements in favor of Kodak which will not recur in future periods.
There is a drop in total shareholder’s equity, but they have shown an increase in the equity percentage held by the company. This seems to be the result of $104k more shares in 2004 than in 2003, since the total number of shares outstanding remained constant in 2003 and 2004. Retained earnings on stock increased in 2004.
The company seems to be in good standing from a profitability viewpoint. If they continue with the changes to the company’s structure, they should be able to stay in a profitable income margin.