Discussion and 1 reply

 
In the video on income statement analysis, they discussed trends.   Please pick an industry and find out a trend within that industry and  discuss what the trend is and what analysis was used to spot the trend.   Please be sure to provide links to your research.

Post by classmate
 
An industry with an Operating Margin (OM) trend is the U.S.  retirement and pension plans industry. Operating margin is an analytical  method of measuring the amount of profit a company makes on each dollar  of sales after paying for the costs of production. Some examples of  those costs are wages and raw materials. Those costs are assessed prior  to paying interest or tax. This analysis formula is a company’s  operating income divided by its net sales/revenue. For these purposes,  higher ratios are usually preferred because that reflects that the  company is efficient in its operations and is good at converting sales  into profits. Adam Hayes from Investopedia summarizes this with, “A  company’s operating margin, sometimes referred to as return on sales  (ROS), is a good indicator of how well it is being managed and how  efficient it is at generating profits from sales.” (Hayes, 2021, p. 1)  Analysis that led to spotting this trend was the discovery of strong  investment gains and steady growth in contributions in this industry  over the last five years. In 2017, revenue growth was predominantly  strong and increased to 115.6% due to significant equity gains. It is  likely relevant to take note of what changed in 2016 to positively  affect those increases.  Those gains were maintained through 2020. This  increase in contributions led to the observation that the margin between  operating income and revenue has increased. This uptick is expected to  maintain through 2021 at a rate of 19.1%, but that seems like a very  unreliable prediction. A lot has changed in 2021 which affects national  and international economics. (IBIS, 2021)
References
Hayes, A. (2021). Operating Margin. Investopedia. Retrieved from https://www.investopedia.com/terms/o/operatingmargin.asp (Links to an external site.)
IBIS, W. (2021). Industries with the Highest Profit Margin in the US in 2021. IBIS World. Retrieved from https://www.ibisworld.com/united-states/industry-trends/?ctid=1&ltid=12&ksid=1&ismm=0

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