Financial Disclosure

17 Pages 4349 Words

of goods sold. Briggs and Stratton is experiencing significant pressure from its customers to maintain and reduce costs. Therefore, increases in costs of goods sold without increases in sales prices reduce net income and profit margins. In using accounting policies to reduce costs of goods sold, Briggs and Stratton can better maintain its net income and profit margins.
For a manufacturing company, product quality is also an important success factor. Briggs and Stratton estimates warranty costs and accounts for those costs as a liability on the balance sheet (Briggs and Stratton, 2002). However, I find it odd that sales increase 15% in 2002 and the warranty liability account actually decreased. I doubt Briggs and Stratton has made adequate revenue adjustments to cover the increased warranty claims. As a result, Briggs and Stratton is most likely inflating its revenue and in turn its net income and earnings per share.
In addition to inventory management and quality, revenue generation is also a key success factor for Briggs and Str...