Does this source appear on the financial statements? 1. Looking at the historical income statements, we can see that income from operations is down, interest expense is up, interest income is down income before taxes is low. If you are anticipating a business to grow, these things should be growing, rather than declining as they are on the income statements. When looking at earnings per share, we can see that between May 2003 and August 2004 they issued more shares, probably because of their expansion.
Historically, December sales represented only 3% of yearly sales, but this year they mushroomed to over 25% of yearly sales. CCL would like to defer the profit on what they consider to be "excess" sales generated as the result of the looming price increase. CCL believes that 2001 sales will be lower because of the bottlers' overstocking to beat the January price increase. Management of CCL is convinced that bottlers are overstocking due to the frank and open discussions that they have had with the bottlers. If deferring this revenue will not be acceptable to the company's auditors, management would prefer to treat these "excess" sales as consignment sales, with the recognition of revenue taking place in 2001 or when the bottler eventually sells this product.
This expense increased over 4 times the amount recorded in 2003. Also interest expenses doubled from 2002 to 2003. If outstanding debt increased on the Balance Sheet, this will substantiate this increase in interest expense. The income statement is important because it gives your data for management to make business decisions based on income of operations. The Net Income that is reported on the income statement is also
The income statement’s total revenues doubled in two years due to their unusual growth. The problem to behind income statement and balance sheets stems from their company owned and franchised factories; instead of selling the donuts, the company sold machinery to make their products. The goodwill and required franchise rights doubled each year until 2004 which raised questions and concerns as to whether Krispy Kreme improperly implemented accounting treatments. Compared to the industry, Krispy Kreme was apparently a very high performing company, but we questioned the performance data. First problem we encountered were the current and quick ratios were unusually high due to the amount of cash, receivables and short term investments that Krispy Kreme held.
May 30, 2011 Reaction Paper on Science Technology Company’s 5 year Forecast STC’s management used a standard increase in sales of 30% annually The Company President should investigate further the basis for the 30% annual sales increase as it seems evident that not enough rationale thinking was used in the planning of the 5 year Sales Forecast. Aside from the market and industry, an important consideration is the historical performance and looking at the past data, the annual sales growth has been erratic at 7%, 11%, 20%, 10%. Using a fixed 30% sales growth every year seems inconsistent with the actual trend of the company’s performance - A fixed 30% annual growth was also used for the projections on COGS, R&D expense, Selling, Gen. and Admin expense. This should again be studied further because it is inconsistent with the actual growth rates from the historical data of 1980 to 1984. There is also a significant increase in loans from 1988 to 1989 but it is not clear where they will be used.
Also they must take into consideration the effects of the volume increase on their distributors. In addition, the present reality of the current shortage of sales and administrative staff needs to be considered. Finally, we must think about how this expansion will affect the company’s culture whether in a good or bad way. If Asahi chooses to expand there could be an upfront financial investment which could be burdensome. This is not the case here due to the fact they could
2010) is provided below. 1167872 4 Despite the leading position and the good business results, SWOT shows several sources of potential risks for UST. The company is losing market share against new price-value competitors because of slow innovation and late product introduction and extensions. Historically, UST relied on his leading market position boosting earnings with annual prices increases. But in the meanwhile smaller competitors started to quickly erode market share with prices cut.
Your first job will be to price this acquisition using a WACC method. Once that is done, it will be useful to also find the value of CPP with and without the acquisition. The next part concerns ascertaining the prudence of the two financing methods. This will require creation of a pro forma balance sheet, which will aid in the calculation of solvency ratios. Debt servicing will need to be examined in detail to discover if one, both, or neither of these financing decisions will force the firm into bankruptcy.
From an accounting prospective, the major problem with the calculations mentioned in the article is determining the rate of return and length of the marketing investment. While the initial value of the “investment”, i.e. marketing expense, can be easily determined, determining the real value after the investment has been made has the potential to be biased without a commonly used measurement. The value of the investment could also fluctuate from year to year based on the companies’ profitability even though marketing had not direct
Discuss the advantages and the limitations of “ratio analysis” There are several advantages and limitations of accounting ratios, I will address some of the key ones in this section Advantages * Accounting ratios can be used by investors to make decisions on whether or not to invest in a company or sell existing shares. * Accounting ratios can be used by management to give an indication of a company’s financial health i.e. is the company profitable? Can they meet creditor obligations? Are stock levels being efficiently managed?