Opossumtown, Inc. has been selling different types of equipment to contractors in the construction industry since 2007. It is a publicly traded company and therefore answers to its shareholders. As with all publicly held corporations, the company needs to show consistent growth in revenue from year to year. Therefore, in 2014 in an effort to increase revenue, Opossumtown, Inc. implemented a plan to increase marketing and selling expenses while decreasing selling prices. By implementing these changes, the company is looking to achieve its goal of increasing operating income by 6% and net income by 4%. In analyzing the balance sheet, it looks like Opossumtown, Inc. did well in 2014 with an increase in total assets by 4.9%. The increase in assets …show more content…
By lowering selling prices across the board, Opossumtown, Inc. reduced its inventory turnover ratio, cutting the number of days to sell inventory from 174 days to 104 days; that is a 40% improvement. Opossumtown, Inc. also cut the number of days it takes to collect its credit accounts from 68 to 44 days, again that is 35% better than the previous year. The company is able to do this while cutting its debt ratio by 10% and increasing its current ratio by 25%, making it appear more favorable in terms of liquidity. As promising as this may look, this is not the whole picture. Opossumtown, Inc. shows an 11% decline in gross profit as well as operating income ratios, and a 3% decrease on the profit margin ratio. The decline of these ratios is a result of the company’s new strategy of decreasing the selling price and increasing its marketing and selling expenses. Opossumtown, Inc. made some noteworthy advancements with the implementation of its new plan for 2014. However, based on the assessment of the balance sheet, income statement and the ratios, the corporation did not achieve its goal to increase operating income by 6% and net income by 4%. Opossumtown, Inc. was only able to grow its operating income by a little more than half of one percent and net income by
Debts are low and revenue is growing. Although sales continue to increase every month, Peyton Approved could benefit from lowering its current ratio. This can be done by lower assets and increasing liabilities. For example, Peyton Approved could lower the current asset cash by paying off its notes payable of $10000 therefore increasing a liability.
In February 1998, Watertown, SD, was not bursting with riveting activity. Watertown had a population of 20,127 people in 1998, which is not much less than the 22,000 residents it has today. Brenda Barger was mayor of Watertown, SD, during the years of some of the worst flooding ever in Watertown. Although the little town of Watertown seems like the perfect rural town to raise a family, it’s not all butterflies and rainbows. On February 1, it was reported that two teenage girls were accused of beating a 47 year-old man to death in his home. David Paul Bauman died of a head injury caused by the girls. Bauman was currently unemployed and mildly disabled due to a car accident a number of years earlier (“2 Teen-agers Arrested in Watertown Killing”
Morro Bay is a beachfront town in San Luis Obispo County, California. It is located along the central coast of California, halfway between San Francisco and Los Angeles. According to the United States Census Bureau (n.d.), the 2010 census reported that Morro Bay had a population of 10,234. Moreover, the 2010 census reported that the total population was composed of 4.4% of persons under 5 years of age, 15.0% of persons under 18 years of age and 23.7% of persons 65 years of age and over. The top three industries in Morro Bay are: “transportation and warehousing; travel, hospitality and tourism; retail and wholesale trade” (Simply Hired n.d.). The companies offering the most jobs in Morro Bay are Gordon Trucking, Cedar Rapids Steel Transport Expedited, and Taco Bell. The per capita income in Morro Bay in 2010 was $31, 899 (Neighborhood Scout, n.d.). Education statistics represent the highest level of education achieved by residents in Morro Bay. In Morro Bay, 8% of residents 18 and over graduated from high school while 31% of residents accomplished a Bachelor’s
Rocket-Blast, LLC, a beverage maker, has seen its profit margins reduced which presents a real problem for the company going forward (Precord & Macdonald, nd). Management has decided that operating costs must be reduced in order to increase profit margins to
The 3 percent decline in sales causing a 21 percent decline in profits can be attributed to the identification of the accounting concept of operating leverage. Operating leverage is what business managers apply to boost small changes in revenue into sizable changes in profitability. Fixed cost is the force managers use to attain disproportionate changes between revenue and profitability. Therefore, when all costs are fixed every sales dollar contributes one dollar toward the potential profitability of a project. Once sales dollars cover fixed costs, each additional sales dollar represents pure profit. A small change in sales volume can significantly affect profitability (Edmonds, Tsay, & Olds, 2011). So, therefore, if sales volume increases,
Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands. Current ratio and quick ratio are really low and have been decreasing. For 1995, the current ratio is 1.15:1, which is less than the industry average of 1.60:1, however to give a better sense of where this stands in the industry, as seen in exhibit 3, it is actually less than the average of the bottom 25% of the industry. The quick ratio is 0.61 is less than the industry is 0.90. Both these ratios serve to point out the lack of cash in this company. The cash flow has been decreasing because, it takes longer to get the money from customers, but the company still needs to pay for its purchases. Also, the company couldn’t go over the $400,000 loan limit, so they were forced to stretch their cash.
Analyzing Wal-Mart's annual report provides a positive outlook on Wal-Mart's financial health. Given the specific ratios and its comparison to other companies in the same industry, Wal-Mart is leading and more than likely continue its dominance. Though Wal-Mart did not lead in all numbers, its leadership and strong presence of the market cements the ongoing success. The review of the current ratio, quick ratio, inventory turnover ratio, debt ratio, net profit margin ratio, ROI, ROE, and P/E ratio all indicate an upbeat future for the company. The current ratio, which is defined as current assets divided by current liabilities, is a measure of how much liabilities a company has compared to its assets. Wal-Mart in the year of 2007 had a current ratio of .90, and as of January 2008 it had a current ratio of .81. The quick ratio, which is defined as current assets minus inventory divided by current liabilities, is a measure of a company's ability pay short term obligations. Wal-Mart in the year of 2007 had a quick ratio of .25, and as of January 2008 it had a ratio of .21. Both the current ratio and quick ratio are a measure of liquidity. Wal-Mart is not as liquid as its competitors such as Costco or Family Dollar Stores Inc. I believe the reason why Wal-Mart is not too liquid is because they are heavily investing their profits for expansion and growth. Management claims in their financial report that holding their liquid reserves in other currencies have helped Wal-Mart hedge against inflationary pressures of the US dollar. The next ratio to look at is the inventory ratio which is defined as the cost of sales divided by average inventory. In the year of 2007, Wal-Mart’s inventory ratio was 7.68, and as of January 2008 it was 7.96. Wal-Mart has a lot of sales therefore it doesn’t have too much a problem of holding too much inventory. Its competitors have similar ratios though they don’t have as much sales as Wal-Mart. Wal-Mart’s ability to sell at lower prices for same quality, gives them the edge against its competition. As of the year 2007, Wal-Mart had a debt ratio of .58, and as of January 2008, it had a debt ratio of .59. The debt ratio is calculated by dividing the total debt by its total assets. Wal-Mart has a lot more assets than it does debt so Wal-Mart is not overleveraged.
One look at the common-size income statements for these companies can tell a story. While Jones Apparel Group was lagging at year ended 1998, even with a restructuring charge on Liz Claiborne’s income statement, 1999 was a different story. Huge growth at Jones lead to revenues double of that one year ago while Liz, while increasing, was quickly falling behind. The growth for both of these companies continued into the year ended 2000, but Jones Apparel Grou...
Merbatty is a boat company with an estimated 8% market share. This company has been in the boat building business for 33 years. Merbatty has wealthy and successful customers that focus more on the quality of the boats than the price. Thus it is important that they get more affordable but high quality material from the right suppliers. The company has put aside a lot of capital to expand over the next 5 years; this 5 year plan will help reach their profitability targets. They are mostly situated in and around the USA and Europe. It has come to their attention that the market has become more competitive and they find it difficult to reduce their cost. The sales made for the company are mostly made by sales agents around the world
Currently, Nicholson’s financial history boasts a 2% increase in profit annually but this percentage is way below the industry average of 6%. Cooper management proposed that if Nicholson stops selling to every market, increased efficiencies would result and cut cost of goods sold from 69% of sales to 65%. It was also suggested that the acquisition could lower selling, general, and administrative expenses from 22% of sales to 19%.
The desired outcomes from reorientation of the company’s business were to reduce risk of increasing prices, decrease costs and increase sales. These desired outcomes have ap...
Cabela’s experienced a large decrease of 30% in accounts receivable in 2009 before a 48% increase in 2010. Recently in 2014 they have seen a 45% increase in their accounts receivables. The accounts receivable turnover ratio is used to calculate how efficiently a firm uses its assets. As Cabela’s has grown, so has its accounts receivable turnover ratio. From 2005-2014 Cabela’s AR turnover ratio has increased 154.89%, largely due to their expansion over the 10 year period. Cabela’s Days Sales Outstanding ratio has seen a large decrease over the 10 year period. From 2005-2014 their DSO ratio has decreased 60%, meaning that Cabela’s now collects revenue from its sales at a much faster rate. Cabela’s AR change to overall sales change ratio saw
The benefits of these assumptions are that while maintaining the current growth rate of 13%; we can maintain our COGS. One of the major factors contributing to the firm’s poor profit margin is operating expenses.
Operating Profit Fell from £504 million in 1998 to £442 million in 1999. The return on capital employed or primary ratio was just 17.06%. This is a great deal smaller than the 1998 figure of 61.2%. These figures both show that the business is achieving a return higher than that which could be achieved in a non-risk investment such as a high interest no access bank account which would only give a return of 7 to 9%.
BlackBerry realized that their inventory was not selling as quickly as they anticipated. The longer their inventory stayed in their holding facility, the more their financial statements suffered. This not