Income Statement Analysis

The company generated $27.20M in total revenue, with the majority coming from Domestic Furniture sales ($21.51M). After accounting for cost of sales ($18.40M) and operational expenses ($5.67M), the business achieved a healthy net income of $3.33M. The overall profit margins and expense ratios demonstrate sound financial management. However, notable areas of risk and interest include high bad debt expense ($792k) and advertising expense ($1.42M).

• Gross profit margin is healthy (32.36%), meaning the company keeps about one-third of revenue after direct costs.
• Operating and net profit margins are solid, suggesting efficient cost control and solid underlying profit.
• The bad debt expense is relatively high (2.91% of revenue), which is a concern for collections risk.
• Advertising costs are significant at 5.2% of revenue, which merits monitoring for ROI.

• Bad Debt Expense: $792,761.82 – This level is notably high and may suggest a concern with the collectability of receivables or credit risk management.
• Advertising Expense: $1,418,751.97 – This is one of the largest single expense lines, and warrants an analysis of its effectiveness in driving sales.
• Revenue Concentration: Over 79% of revenue is from Domestic Furniture. Customer or product concentration can be a risk if market conditions for this segment change.
• Inventory Adjustments: The negative value (−$13,025.73) slightly offsets expenses, implying inventory write-ups or recoveries.
• Exchange Rate Variance: The company benefitted from favorable FX movement (−$170,636.01), but FX can swing both ways.
• Other notable expenses: Payroll, rent, and office expenses are major operational outlays, but not unusually high relative to revenue.
• No individual customers or vendors are listed in this report; items listed are product or revenue categories only.
• Potential risk: High reliance on a single product line, high bad debt expense, and significant advertising spend.

• The bad debt ratio is high—suggesting increased risk of non-payment or poor credit vetting.
• Advertising spend is substantial—management should track its effectiveness versus revenue growth closely.
• The company benefited from a favorable $170k FX variance this period, which may not persist in the future.
• No negative net income—overall, operations are solid, but risk areas should be monitored closely.

• Investigate sources of bad debt. Consider tightening credit policies, improving collections, or reviewing customer quality.
• Review the ROI of advertising spend and optimize budget allocation for best-performing channels.
• Monitor product and customer concentration. Seek to diversify revenue streams beyond Domestic Furniture to hedge risk.
• Continue to manage expenses closely — especially operational and payroll areas — to preserve healthy profit margins.
• Stay aware of FX exposure; implement hedging strategies if international transactions are significant.