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Determine gross profit and gross profit margin

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Question: The consolidated income statement for Babcock International Group PLC is presented here:

2097_Income Statement.png

The income statement does not disclose any detail on the operating expenses that were subtracted in determining operating profit, but refers readers to several notes (Notes 3, 4, 5, and 6). The income statement also does not explain the nature or amount of "exceptional items," which are items unlikely to recur in future years. In analyzing Babcock's financial statements, you would like to determine the company's gross profit margin for the current year and you also would like to develop an estimate of sustainable income, that is, the income generated in the current year that is likely to persist into the future.

Required: Access Babcock International Group's 2009 annual report at www.babcock. co.uk and use the information in Notes 4 and 6 to:

a. Determine gross profit and gross profit margin (Gross Profit/Revenue) for 2009.

b. Estimate sustainable income for 2009. Sustainable income is equal to total income less items included in total income that are unlikely to recur. Indicate any assumptions made in estimating sustainable income.

Reference no: EM131705602

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