Inventory had a slight increase from 4% to 4.8% in 2004. The increase in accounts receivable shows an increase in credit sales. While the decrease in cash and cash equivalents and increase in marketable securities shows that Lucent is removing idle cash and investing to earn interest and cash inflows are declining. The increase in inventory shows their products are revolving as well as they should. Total current assets have declined from 49.4% to 48.5%.
First I had to find the break-even points for units and dollars and see how the margin of safety had changed and what caused that change. In Exhibit 1, 2, and 3 you can see my data for the break-even points and how I found them. After calculating the break even points I found that each year they were increasing. This happened because the fixed cost increased each year while the contribution margin decreased except for 2006. In 2006 the fixed cost was at its highest due to a new rent that was larger and more employees.
LUCENT TECHNOLOGIES CASE ACC/230 January 7, 2011 Eddie Mattison LUCENT TECHNOLOGIES CASE After reading the Case Review of Lucent Technologies, it’s obvious that the assets of Lucent Technologies suffered a large decline between the years of 2003 and 2004. 49.4% of their total assets in 2003 consisted of their current assets, and in 2004 the percentage of their current assets decreased to 48.5%. Lucent Technologies total current assets increased from $7,863 in 2003 to $8,231in 2004. After a very thorough analysis, it is also obvious that the inventory of Lucent Technologies increased between the years of 2003 and 2004, because in 2003 the percentage of inventory was only 4% and it rose to 4.8% in 2004. In measuring the company’s cash and cash equivalent, it was clearly seen that their entire assets decreased by 24% in 2003 and almost 20% in 2004.
Wilkerson had been forced to slash prices on their highly recognized and high-volume commodity product line, the pumps, in efforts to maintain their competitive ranking as a major pump supplier and in response to the reduction of pump prices by competitors in the marketplace. As a result of the adjustment, gross margin of pump sales in March 2000 has plummeted to 19.5%, significantly lower in comparison to their planned gross margin of 35%, as well as contributing to the decline in pre-tax margin to 3%, a considerable disparity from their previous admirable 10% margins. The company produces flow controllers, which are customized to meet varying requirements of different industries. Thus, this product line demands more components, production runs, labor, and shipment than both valves and pumps. Unlike pumps, flow controllers are not confronted with pressures of extremely competitive market.
A rise in oil prices would also directly affect business performance as oil is a cost of production to firms, especially to those which produce oil related products, hence reducing profits and limiting the amount of money that firms can reinvest. All of this would result in a fall in real output from Y1 to Y2, representing a fall in economic growth. One could say that a fivefold increase in
This measures the risk of investing in a company. In other words, the decline in margin of safety shows that the difference between sales completed and sales needed to break even getting smaller. These changes can be attributed to their total sales amounting to a value less than the breakeven point in sales. 2) If average prices were reduced 10%, and sales tickets were increased to 14,000 the income of the company would increase. However, even with this change in values, the company is still under its breakeven point.
Taking a further look, an analyst might have some concerns when looking over Kodak’s account payables and liabilities. There was a high increase in Kodak’s liabilities which pose concern for how well and willing is Kodak able in paying back its debt. Although Kodak’s total assets could cover its liabilities, the high increase in liabilities alone would cause some concern with analyst. Another important point analyst might use when they are assessing the profitability of Eastman Kodak is the substantial decrease in the company’s net income between 2002 and 2003. This alone will cause some concern and would pose analyst to research further the reasons for such decrease.
1993 94 95 96 Total liabilities 45% 68% 73% 72% / total assets Days payables 35 47 54 56 Current ratio 2.5 1.6 1.1 1.2 Clarkson Lumber Company position has weakened. Total liabilities as a % of assets increased considerably from 45% to 72%. Trade credit has been stretched from 35 days in 1993 to 56 days in 1996. Current ratio (CA/CL) has declined tremendously from 2.5 to 1.2. In addition, in the absence of improved profitability, continued sales growth will lead to a further weakening of Clarkson’s financial condition.
Another reason for the slow growth in the late 90’s was the over expansion in the previous years. In this report, we are going to forecast Body Shop´s Financial Statement for the next three years (from 2001) and follow the new implemented strategy of 2001, which are: firstly, to enhance Brand Name & increase investment, secondly, to decrease the cost and make the company more efficient, and finally to reinforce the stakeholder culture. Our forecasting will mainly focus on the first two elements. Basic Assumption This paper forecasts the earnings and financial need of Body Shop over the next three years, by using historical sales information and other accounting ratios. Due to insufficient information, this forecast will mainly focus on relationships between sales and accounting ratio.
Further analysis was conducted to get to the core of the problem the management is facing and consequently, provide recommendations on how to go about these issues. Issues: * Low and declining Profits: During the first quarter of 1991, there was profit loss of ($ 174,000) which declined even further in the second quarter to ($121,000) (Exhibit 1). Reasons may include: * Due to high turnaround times (TAT) * Calculate by management to be 8.2 days * Causes agents to refer clients to other companies * Causes congestion and increased accumulation of policies * Due to reduced number of renewals (low renewal rates) because of increased volumes of late renewals * Due to focus on new policies only * Due to late policies * Late RERUNs amount to 99.67% of total late requests processed in 1991 which means it has a big impact on total late requests processed. * Poor performance and efficiency * Processing issues: * wrong prioritization of policies * Emphasis on RUNs and RAPs and less on RAINs and RERUNS (although RAPs and RERUNs amount to 38.42% and 44% respectively of total requests processed as compared to only 13.33% RUNs and 9.64% RAINs. * uneven workload distribution and uneven