Information Blockbuster Inc Income Statement for yearended D

Information:

     Blockbuster Inc.

           Income Statement for year-ended Dec 31 ($000\'s)

Year 1

Year 2

Sales

4,969,100

5,157,600

COGS

2,036,000

2,420,700

SG&A

2,390,600

2,532,400

Depreciation

279,000

246,600

Amortization of Intangibles

180,100

176,100

Operating Income (Loss)

83,400

-218,200

Interest Expense

116,500

78,200

Income Before Tax

-33,100

-296,400

Income Tax Expense

45,400

-56,100

Net Income

-78,500

-240,300

QUESTION:

	Year 1	Year 2
Sales	4,969,100	5,157,600
COGS	2,036,000	2,420,700
SG&A	2,390,600	2,532,400
Depreciation	279,000	246,600
Amortization of Intangibles	180,100	176,100
Operating Income (Loss)	83,400	-218,200
Interest Expense	116,500	78,200
Income Before Tax	-33,100	-296,400
Income Tax Expense	45,400	-56,100
Net Income	-78,500	-240,300

Referring to the Blockbuster financial statements, what is the change in Gross Margin from Year 1 to Year 2? (Delta GM = GM2 - GM1)

Solution

gross margin = gross profit/sales = sales - COGS/sales

gm2 = 5157600-2420700/5157600 = 53.06%

gm1 = 4969100-2036000/4969100 = 59.03%

chsnge in margin = - 5.96%