Riordan Manufacturing - Profit & Loss Statement Analysis

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Riordan Manufacturing: Profit and Loss Statement Analysis


An effective indicator of a business’s overall performance and efficiency is the profit and loss statement. A profit and loss statement, more commonly referred to as an income statement, is a report of the changes in the income and expense accounts over a specific period of time. It provides a valuable source for identifying marketing trends, understanding the strengths and potential weak areas of a business, and measuring the efficiency of operations. This paper will analyze the income statement and financial status of Riordan Manufacturing, Inc. Riordan Manufacturing is a global plastics manufacturer with 550 employees and projected annual earnings of $46 million. The company is owned entirely by Riordan Industries, a Fortune 1000 enterprise with over $1 billion in revenues. Its products include plastic beverage containers produced in Georgia, custom plastic parts produced in Michigan, and plastic fan parts produced in China. The company’s research and development is done at the corporate headquarters in California. Riordan’s major customers include aircraft and automotive part manufacturers, the Department of Defense, and appliance manufacturers (Riordan Manufacturing 1). In the last few years, Riordan has a managed sales data electronically. Available sales information includes order, delivery, and payment dates by order. Additional sales information also available includes the unit and dollar volume of each product and sales by customer to include price paid, cost, margin, and any discount given. The marketing department, with the support of the finance and production departments, maintains profit and loss statements, by item and by group. According to Riordan’s income statement for the 2004-2005 fiscal year, the company increased sales by nearly $4.8 million in comparison to the previous year (1). However, this increase in revenue does not necessarily indicate an increase in profits....
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