Appendix 2: A Note on Interpreting Our Financial Analysis and Currency References

Interpreting Our Financial Analyses

• Total revenue: The entire amount of money taken in by a business in a particular time period.

• Net sales: Gross sales minus returns, discounts, and allowances.

• Cost of Goods Sold: The cost of purchasing raw materials and turning them into finished products. These are the direct costs of production.

• Operating expense: Expenses incurred in the course of normal business operations but not direct inputs into production of goods. Distinguished from non-operating expenses, which are expenses incurred in performance of activities not directly related to the main business of the firm.

• Operating income: Considered a measure of a company’s earning power from ongoing operations, it is equal to earnings before deduction of interest payments and income taxes. Operating income is also called operating profit or EBIT (earnings before interest and taxes).

• Net income: What remains after subtracting all the costs (operating and non-operating expenses, depreciation, interest, and taxes) from the company’s revenues. Net income is sometimes called the ‘bottom line,’ earnings or net profit.

• SG&A: Refers to Selling, General and Administrative expenses, which includes salaries, commissions, and travel expenses for executives and salespeople, advertising costs, and payroll expenses.

• EBIT: see Operating income.

Interpreting Our References to Global Currencies

All our financial analyses were performed in the local currency. Final conversions to U.S. dollars were performed after the analysis was completed, and were based on conversion rates on March 31 of each year under study (i.e., 2007 financial data were converted using historical rates from March 31, 2007; 2006 data were converted using rates from March 31, 2006, and so forth).

For currency amounts referenced in the narrative text of each case study (for example, the cost of a product sold or the amount of a loan obtained by an enterprise), these conversions were calculated using the real-time conversion rates for September 20, 2009.