Read, evaluate and compose a substantial in-depth response (minimum 150 words) :

question: When looking at the income statement for your firm, you notice that your Cost of Goods Sold was $1M in 2012, $1.2M in 2013 and $2M in 2014. How will you determine if there is an issue you should be worried about? What other types of financial statements might you look at to see if there is an issue and why?

A company reports all its yearly expenditures including assets, liabilities, and more. These reports help show where the company is losing or gaining profits. The income statement is the main report that does this for a company. This report shows the revenues, expenses, and the profitability of the company. In this case, the Cost of Goods sold has doubled within a two-year span. A couple of things that need to be investigated is :

Did the cost of production increase as well?

Did labor cost increase?

Did the cost of materials increase?

Inflation is something we see over the years happen due to the shift in the economy but double the amount of money can be a trigger to show that they need to pay attention to the different things that can be taking place to cause this. In this case of the company going from $1M to $2M within these two years, if sales also increased substantially than there is no issue. However, if sales have not increased to produce numbers like that then management looking into it to see what exactly is causing the increase and what the plan would be to recover any costs that could have been avoided.