Financial Accounting and Performance Analysis Report

This report delves into financial accounting, examining non-operating expenses and gross profit margins within the context of Sobey Inc. and North West Company. It analyzes the financial performance of these companies, calculating and interpreting key metrics such as percentage change in sales revenue and gross profit margin. The report defines non-operating expenses and their significance, highlighting the impact of interest expenses and income taxes. It also calculates and compares the gross profit margins of the two companies, offering insights into their financial health and cost management strategies. The analysis includes relevant references to support the findings and provides a clear understanding of the financial concepts discussed.

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Financial Accounting
(Student Details: )
1/26/2020

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Financial Accounting
Solution A
In the context of the North West Company Inc. there are non-operating expenses as well as
revenues included in the company’s income statement as follows:
 Non-operating expenses
o Interest expenses for year ended 31st Jan, 2016 and 2015= $6,210 and $6,673
o Income taxes for year ended 31st Jan, 2015= $31,332 and $27,910
 Non-operating revenues
o Total comprehensive income, net of tax for 2016= $16,521
o Total comprehensive income, net of tax for 2015= $-554
In this context, non-operating expenses are the expenses having no relation with the business
of the company (Needles and Powers, 2010). In this way, non-operating expenses are
typically unrelated with the key activities of the business. Both the interest expenses and
income taxes fall into the category of non-operating earnings and expenses (Needles and
Powers, 2010). A non-operating expense is an expense incurred by a business that's unrelated
to its core operations. Hence, the key types of non-operating expenses are related to
amortization, depreciation, interest charges or some other costs of borrowing (Harrison et. al.,
2014).
Solution B
In the context of Sobey Inc and the North West Company Inc, percentage change in sales
revenue is as follows:
1. Percentage change in sales revenue for Sobey Inc.
(24,618-23,928)/ 23,928= 0.029
2. Percentage change in sales revenue for North West Company Inc
(17, 96035 – 16, 24400)/ 23,928= 0.106
Gross profit margin for each of the two companies is as follows:
1. For Sobey Inc.=(Gross profit/Net sales)*100

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= (24,618-18,661.2)*100/24,618= 24.20%
2. For North West Company Inc.
= (Gross profit/Net sales)*100= (522614*100)/1796035= 29.10%
In general, gross profit margin is the method used to assess an organization's financial health
as well as business models through revealing the amount of money left over from sales after
deducting the cost of goods sold. In this context, gross profit margin calculated for the two
companies is 24.20% and 29.10% for the companies Sobey Inc. and North West Company
respectively. Thus, high value of gross profit margin is showing that the companies are doing
well while managing their cost of sales. In addition to that, high gross profit margin shows
that both the companies are having enough resources for covering operating, financing, as
well as other costs (Harrison et. al., 2014). In this way, gross profit margin may further be
improved through improving sales price as well as decreasing cost of sales.

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References
Harrison Jr, W.T., Horngren, C.T. and Thomas, C.W., 2014. Financial accounting. Pearson
Education.
Needles, B.E. and Powers, M., 2010. Financial accounting. Cengage Learning.