Financial Analysis Task 1 Western Governors University Horizontal Analysis of Competition Bikes, Inc. In a horizontal analysis of years seven and eight it appears that though there was a reduction in net sales the cost of goods sold and gross profit all reduced at similar rates which indicate that as sales dropped overall materials cost did as well and that inventory was well managed. Selling expenses also change consistently which indicates the company made smart decisions around selling their products as demand declined. Lastly, the long term liabilities reduced which shows that the company did not take out further debt to finance operations. A couple of points to look at include the fact that utility expense increased 11% year over year.
Notwithstanding increasing dividends and a moderately stable share price, the home improvement retail industry remains to struggle due to the fragmentary world wide economic complications. Throughout 2009 Home Depot recorded expenses as much higher as well as the drop in sales. While Home Depot the company is very strong, the drop in sales and net earnings brought fourth some restraints until the economy shows signs of improvement. With this in mind The Home Depot, Inc. initiated strategies in the fiscal year 2008, to help minimize losses while maintaining a strong customer base. Which in turn may have the company to increase their credit programs for consumers with the intention to increase sales.
Because of their consistently low prices on products, their competitors have lowered their prices in order to compete with Wal-Mart. In turn, this has driven overall prices down. Wal-Mart has also created many new jobs and increased tax revenues. Businesses that are located next to Wal-Mart stores have also benefited from them because customers who are shopping at Wal-Mart will stop at other businesses before or after shopping at Wal-Mart ("Walmartstores.com: Economic Opportunity"). Because of the impact Wal-Mart has had not only on the retail industry in the United States, but also globally, I think it is safe to say that Wal-Mart is a very secure company.
In the early business years total expenses exceeded total revenues, which resulted in negative net incomes in 1998, 1999 and the first quarter of 2000 (Exhibit 9). Since Honest Tea is a just established start-up this is not a bad thing, but around 2000 it became time to think about playing breakeven. The $2 million cash could, inter alia, be used to finance the losses and to invest in new distribution channels. The question how much money they actually need and therefore should raise in the next financing round can be seen in question 2 provided below. In the beginning, the founders focused on the strategy of building up a strong presence in the local market for several years, before expanding nationally.
This is important to measure, where sales in stores open at least a year has declined for Target. Target Corporation’s current ratio and quick ratio have both increased in 2008 from 2007. The quick ratio measures the short-term liquidity of the company. The current ratio, which assesses current assets in proportion to current liabilities, has remained fairly consistent from 2006 to 2008. Although the current assets have increased, the currently liabilities have increased as well.
I calculated an “inventory turnover ratio” which measures the number of times a company sells its inventory during a year. A high rate of turnover indicates easiness in selling inventory; a low rate indicates difficulty. In 2011, the inventory turnover was 6.1. By 2012 the ratio decreased to 5.2. The decrease may be due to a slow ability to turn around merchandise in sales and potentially due to paying a higher cost for goods.
CFO is larger than net income each year due to the noncash charges of depreciation and amortization. In 2008, net income is negative, but CFO is still positive as $1,879 million due to the one time goodwill impairment charges. Inventory has decreased from 2006 to 2008, after its acquisition of May in 2005. Receivables also decreased each year, which maybe a sign that the company’s receivable quality has improved. Macy’s decreased its purchase of inventory and property and equipment and decrease disposition of property and equipment year by year.
Although Coach has seen their profit margins and market share grow exponentially, there are a few issues that should be addressed in order to sustain profitability in the long term. 1) Reliance on U.S. Sales In 2007, 76% percent of Coach Inc.’s sales came from the United States. Louis Vuitton, one of Coach’s main competitors, has a better distribution of their revenues geographically with only 26% coming from the U.S. market, 37% from Europe and 30% from Asia. With most of company sales concentrated in the U.S., Coach will have to depend on the domestic economy to remain stable, as a downturn could lead to American consumers
For example, companies that offered a higher discount rate, such as Ross Stores with 70% discounts, were ranked lower in terms of quality. Strategic Implications The strategic map, along with the case facts, displays how businesses that offer discounted products, such as Ross Stores and TJX Companies, are beginning to rise and dominate the industry. This is evident, as both of these companies have gained over 2% in market shares since 2009, while Gap has been losing market shares, down 3.6% since 2006. The growing market of discount buyers means that companies, such as Gap and American Eagle, will have to soon decide whether they want to enter this emerging market or turn to offering higher quality products and attempt to compete with stores like Abercrombie and Fitch, whose market share is small but has remained consistent. It has become evident that remaining in the middle of these two markets, the
Therefore, prices of the kraft linerboards were selling at very low prices. However, a couple years earlier, there was an economic boom where the spot price for kraft linerboard had exceeded the KEA set price. Thus, with the possibility of the economic conditions improving, DNP - Italia needs to consider the long run of entering into a contract based on a price of raw material purchased from the "spot" market. This price may be low for a certain period of time, such as when economic conditions are weak but when conditions improve, this may result in implications for the purchasing company. The bid submitted by DNP - Italia included $220 per ton of raw material which was purchased from the European "spot" market.