Basic Elements of Financial Reports Comparative income statements for Grammar Inc. are as follows:

Required The president and management believe that the company performed better in 2008 than it did in 2007. Write the president’s letter to be included in the 2008 annual report. Explain why the company is financially sound and why shareholders should not be alarmed by the $20,000 loss in a year when operating revenues increased significantly.

Transcribed Image Text:

2008 2007 Sales Cost of sales $1,000,000 $500,000 500,000 300,000 Gross profit $ 500,000 $200,000 Operating expenses 120,000 100,000 Operating income $ 380,000 $100,000 Loss on sale of subsidiary (400,000) Net income (loss) $ (20,000) $100,000