M&M Case Essay

420 WordsAug 17, 20142 Pages
Scott Muehlenberg BUS ADM 453 Corporate Finance Seminar Summer 2014 Midterm Using M&M Hardware, Incorporated’s financial statements, I evaluated their current financial health and recent financial performances. I used the most relevant data from the Income Statement and the Balance Sheet to calculate profits, turnover, and other ratios to help evaluate the current financial strengths and weaknesses of the company. From the Income Statement I calculated the company’s gross profit, which has continued to increase the past several years. The total asset turnover ratio has steadily declined, except 2009 and 2010, indicating that M&M Hardware hasn’t been as efficient generating revenue per dollar of assets. The receivables turnover ratio has been inconsistent over the past several years. The inventory turnover has steadily decreased the past several years, meaning one of two different things: either they haven’t been buying inventory effectively or they have strong sales. Considering the fact that operating profit and gross profit is steadily increasing each year, and being in the hardware industry, this signals strong sales rather than inefficient inventory purchasing. While the current ratio is still under 1, indicating a weakness to pay back the company’s obligations, it is steadily increasing each year. The quick ratio is well under 1, which indicates that the company is not very liquid, and this is one of the company’s weak points. M&M’s debt ratio is consistently increasing, indication that the company’s financial risk continues to increase. In calculating the weight average cost of capital, I used the target debt to capital ratio of 18%, as well as the 9.25% cost of debt that is given. I used the average of Micron Technology, SanDisk Corporation, and STEC, Inc.’s beta to input for Flash Memory’s beta into the WACC calculation. The average

More about M&M Case Essay

Open Document