Radio Shacks Sales Revenue - Research Paper Example

Download file to see previous pages The expenses when added to the revenue get gross profit or loss, and operating income or loss. This assignment will limit Radio Shack's sales revenue.
The activities mentioned above are operating activities. Operating activities in business are associated with the revenue and expenses or in other words cash inflows and outflows. Thus, operational activity in accounting is called cash flow. This assignment will be limited to the study of Radio Shack’s cash flow from the operation in the fiscal 2010 year.
Cash flow from operations may be calculated using direct or indirect methods. This assignment will use the indirect method. Necessary data, for this purpose, will be acquired from the company’s Income statement and Balance sheet (Yahoo; YCHARTS).
Sales Revenue for year 2010 = 4,265,200,000 (Yahoo)
Cash at the beginning of the year 2010 = 908,200,000 (YCHARTS a)

Operating Cash Flow (OCF) calculation (Accounting Explained)

Net income 190,700,000
Adjustment to the net income of 38,600,000
Depreciation 99,200,000
Net payable 600,100,000
Deferred Tax 12,000,000
Net Receivable -377,500,000
OCF 563,100,000

Cash at the end 2010 = Cash at the beginning + OCF = 908,200,000 + 563,100,000 = 1,471,300,000
However, according to the company Cash flow (YCHARTS a) statement, cash at the end of 2010 was 569,400,000. This shows that the company did not collect all revenue, which is also shown through the increase in receivables from 2009 to 2010 (YCHARTS b). The company made more sales than cash collections.

The above table shows Radio Shack’s Sales and Net income trend for years from 2008 to 2011. Revenue from sales during this period was more or less stable; though in 2009, it increased by 1.23 % concerning the previous year; in 2010 decreased by – 0.23 %, and in 2011 again increased by 2.63 %. The net income trend was quite erratic; in 2009, it increased by 8.24 % concerning the previous year, and then it dropped in 2010. In 2011 net income dropped by 65 % concerning the previous year. The company Income Statement did not show any dramatic increase in operating expenses. However, it was observed that both in 2010 and 2011 when net income dropped gross profit also dropped. The drop in net income in 2010 and 2011 should be attributed to a decrease in gross profit. The decrease in gross profit is associated with the increase in the cost of revenue, which is displayed in the above table.

A study of the net income of Radio Shack’s competitor Best Buy also shows a decrease in net income in 2011 2011. We may conclude that year 2011 decrease in net income was a trend; however, Radio Shack’s net income drop in 2011 was much higher than its competitor Best Buy. Based on the above analysis, I recommend Best Buy stocks instead of Radio Shack’s ...Download file to see next pages Read More