Question

The following comparative income statement (in thousands of dollars) for the two recent fiscal years was adapted from the annual report of Speedway Motorsports, Inc., owner and operator of several major motor speedways, such as the Atlanta, Texas, and Las Vegas Motor Speedways.

1 Current Year Previous Year
2 Revenues:
3 Admissions $116,034.00 $130,239.00
4 Event-related revenue 151,562.00 163,621.00
5 NASCAR broadcasting revenue 192,662.00 185,394.00
6 Other operating revenue 29,902.00 26,951.00
7 Total revenue $490,160.00 $506,205.00
8 Expenses and other:
9 Direct expense of events $101,402.00 $106,204.00
10 NASCAR purse and sanction fees 122,950.00 120,146.00
11Other direct expenses 18,908.00 20,352.00
12 General and administrative 183,215.00 241,223.00
13 Total expenses and other $426,475.00 $487,925.00
14 Income from continuing operations $63,685.00 $18,280.00
Required:
A. Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. Rounding instructions
B. Comment on the significant changes.
Prepare a comparative income statement for these two years in vertical form, stating each item as a percent of revenues. Enter all amounts as positive numbers. Rounding instructions

Answer 1

A)

Speedway Motorsports, Inc.

Comparative Income statement

For the Years 202x and 202x₋₁

202x 202x₋₁

Total revenue $490,160 $506,205

• Admissions 23.67% 25.73%
• Event related 30.92% 32.32%
• NASCAR broadcasting 39.31% 36.63%
• Other operating revenue 6.1% 5.32%

Direct expenses: 49.63% 48.74%

• Direct expense of events 20.69% 20.98%
• NASCAR purse & sanction fees 25.08% 23.73%
• Other direct expenses 3.86% 4.03%

General and administrative 37.38% 47.65%

Income from continuing operations 12.99% 3.61%

B) The most significant changes are that total revenues actually decreased, but net income from operating activities actually creased both in $ amounts and as % of total revenue. Direct expenses remained at similar levels during both years, even 202x₋₁ direct expenses were lower. But the most significant cost reduction was made on general and administrative expenses which were lowered by almost 10% (compared to total revenues). Only NASCAR broadcasting related revenues increased, while all the other revenues decreased in % and absolute amounts.