Knowing how the various sections of the company are functioning will help the manager identify where the company is strong, where it is weaker, and what things the manager can improve. This should assist the manager in managing the company performance in a proactive and effective manner. The following is an extract of Adidas Consolidated Income Statement for the year ending 31 December 2020:
Based on the information given, it can be seen that the company's performance decreased compared to the previous year. If the HQ decides to close one of its branches
a)EXPLAIN THREE (3) reasons why the company should not make the decision solely based on the financial report produced
b). Instead of focusing on the financial aspect when making a decision, EXPLAIN TWO Non-financial aspects that the HQ should consider in making their decision that could help them in maximizing their productivity and profit
Extracted text: CONSOLIDATED INCOME STATEMENT adidas AG Consolldated Income Statement (IFRS) € in millons Year ending Dec. 31, 2020 Year ending Dec. 31, 2019 Note Change Net sales 38 19,844 23,640 (16.1%) Cost of sales Gross profit (12.0%) (19.8%) 9,990 11,347 9,855 12,293 (% of net sales) (2.3pp) (46.2%) 49.7% 52.0% Royalty and commission income 83 154 Other operating income 31 42 56 (24.5%) Other operating expenses 11, 14, 32, 33 9,229 9,843 (6.2%) (% of net sales) 46.5% 41.6% 4.9pp Marketing and point-of-sale expenses (% of net sales) Distribution and selling expenses 2,573 3,042 (15.4%) 13.0% 12.9% 0.1pp (0.7%) 4.962 4.997 1% of net sales) 25.0% 3.9pp (11.6%) 21.1% General and administration expenses 1,461 1,652 (% of net sales) 7.4% 7.0% Sundry expenses (% of net sales) 0.4pp (11.6%) 0.0pp 119 134 0.6% 0.6% Impairment losses (net) on accounts receivable and contract assets 114 18 541.8% Operating profit (% of net sales) Financial income Financial expenses Income before taxes 751 2,660 (71.8%) 3.8% 11,3% (7.5pp) 34 29 64 (55.2%) 34 204 166 23.2% 575 2,558 (77.5%) (% of net sales) 2.9% 10.8% (7.9pp) Income taxes 36 146 640 (77.2%) (% of income before taxes) Net income from continuing operations 25.4% 25.0% 0.3pp 429 1,918 (77.6%) (% of net sales) 2.2% 8.1% (6.0pp) Gain from discontinued operations, net of tax 03 13 59 (77.5%) Net income 443 1,977 (77.6%)