After reviewing Eastman Kodak’s financial statements, there are certain points analysts will look at when assessing the company’s profitability; operating income, comprehensive income, total liabilities, and total shareholders’ equity. Eastman Kodak’s sales grew each year from 2002 to 2004. However, this is not a good indication of the company’s profitability because of the increase in operating costs. Between 2002 and 2004 the operating costs increased by 19 percent, while sales only increased by 7.14 percent.
The cost of goods sold increased exponentially each year, between 2002 and 2004. Although costs were better controlled in 2004, it was not enough to cover the increase in costs of goods sold generating a total operating loss of $558,000.00. In 2003, the gross profit margin decreased while selling, general and administrative expenses and restructuring costs increased resulting in the recession of gross profit margin.
Despite the operating loss in 2004, the net profit margin is positive throughout the three years. Another income in 2004 is a result of legal settlements in Kodak’s favor, a onetime item. In 2004, Eastman Kodak showed a reduction in long term debt. There were also substantial changes in Eastman Kodak’s liabilities and stockholder’s equity in 2004. There was a significant increase of $266,000.00 in accounts payable, and a $477,000.00 decrease in short term borrowings. As well as an $18,000.00 decrease in accrued income taxes, this left a total decrease of $265000.00 in total current liabilities.
Overall, Eastman Kodak has generated sales growth throughout the years. However, it is very impressive due to an increase in other costs. While Eastman Kodak’s gross profitability is currently positive, they have many challenges to overcome.