Financial Analysis Task #5

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Financial Analysis Task #5 July 3, 2014 A1. Key Points Custom Snowboard Inc. CFO Report: Custom Snowboards Inc. has found a lot of success both in the United States and overseas. Their products are so popular the company is considering an expansion into Europe to better serve their international customers and expand their brand to a new market. However, all the risks of a very expensive expansion must be considered as well as the benefits needs to be reviewed. The key points that must be addressed in the income statement are: • Increasing Gross Profits • Decreasing Net Earnings • Increasing Total Operating Expenses • Decreasing Operating Income The key points that must be addressed in the balance sheet are: • Changes to…show more content…
The risks that need to be put in the spotlight for the CFO are the following: Risk #1 General & Administration cost increase over 3 years. This increase in pay for employees lowered the operating income dramatically. If this expense continues in the same behavior the company has the potential to not be able to make their interest payments in the future. Mitigate Risk #1 To mitigate this risk it is wise for Custom Snowboards Inc. to evaluate these costs and determine if they are still warranted. After the evaluation of these costs immediate elimination of any unnecessary or unwarranted expenses must be executed. Risk #2 Total Current assets exceed total current liabilities is a good indication that executives are not utilizing assets to the company’s advantage. There is always room for improvement even though the company has a relatively good working capital. Mitigate Risk #2 Accounting managers should evaluate the assets and determine how that money can be used to improve other areas of the budget or improve the company’s working capital. Risk #3 The current operating income is low and gives the notion that working in the new European market is near impossible. The operating income decreased over the last 3 years because of increased expenses the idea of adding in the European Market could strain the company’s
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