Financial Analysis Summary Report
Task 1
Competition Bikes Incorporated
Lisa A Castro, MSW
Western Governors University
Horizontal Analysis (A. 1. a) A horizontal analysis can be defined as “the study of percentage changes in comparative statements” (Charles T. Horngren, 2008, p. 746). It is useful in determining a company’s financial stability. This section will analyze Competition Bikes Incorporated’s (CBI) percentage changes from years 6 to 7 and then 7 to 8. The report will include an analysis of CBI’s comparative income statement and balance sheet.
Between years 6 and 7 CBI’s Net Sales increased by 33.3% for a change of $1,495,000. The increase of 33% indicates strength for the company because it means that the
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This is a weakness for CBI because it could indicate that they are not collecting from their buyers in efficient or timely manner. When a company has large amounts of funds that are uncollected they do not have the cash on hand to purchase raw materials and pay expenses, which can negatively impact its ability to turn a profit. This will be examined further when the average collection period is analyzed later in this report. Between years 6 and 7 CBI’s Total Assets have increased by 2.2% for a change of $93,741. This shows strength in CBI because by increasing their assets they also increase their value. This can help instill confidence in current as well as potential shareholders.
Between years 6 and 7 CBI’s Accounts Payable and Notes Payable increased by 192% for a change of $128,820. This indicates a weakness as the company has more than doubled their debts between these two years. Significantly increasing debt can impact shareholder confidence, which could impact the market value of CBI stock. Between years 6 and 7 CBI’s Long Term Liabilities decreased by -5.6% for a change of negative ($105,000). This indicates strength for CBI as it demonstrates that the company as allocated monies to pay down their long-term debt further reducing their liabilities. Between years 6 and 7 CBI’s Retained Earnings increased by 17.4% for a change of $170,121. This is strength for CBI because it demonstrates its ability and willingness
Climbing from $146.9 million in 2007 to $528.8 million in 2013, the net cash provided by operating activities has almost tripled and reached a CAGR of 23.79%.
Company does not have big amount of debt to pay. In 1994 its outstanding debt is only 36.4% of its total assets which is a healthy rate. Its current assets are higher 2.4 times than its current liability. Also company has no outstanding interest to pay. Price earning ratio of 42.80 is highest among the competitors. (Pls. see exhibit 2, 3&4) for details. So we can safely conclude that BBBY has great potential to sustain.
Total profit show a positive increase from 18% in 2013 to 31% in 2015, far reaching the brothers’ preference of $1.1 M in 2015, Appendix 3 showed $1.4 M net profit
By paying out excess cash and issuing debt, BBBY could improve return to equity holders and raise earnings per share (by a share repurchase).
A1. Budget Concerns Competition Bikes budget has several areas of concern that need to be address. 1. Units expected to be sold for year nine is 3510. Competition Bikes is predicting that they will sell 3510 Bikes but they only sold 3400 Bikes in year eight down 15% from year seven 4000 units sold. Competitions Bikes has budget to high because the current economic down turn is showing no signs of relief for the next three years. Many of Competition Bikes customers are sponsored riders and many sponsors have pulled their funding to their rides. Competition Bikes has not presents a plan that would support their projections. Competition Bikes should lower there should lower the expected units sold so not to over order raw materials that will
during year 12 and year 13. However, in year 13 and year 14 total current assets fell
Since the Competition Bike Company projected overly optimistic sales, there are several areas in the budget that will be affected. The areas affected are Sales Commission, Transportation Out, Advertising, Research and Development, Raw Materials, and Labor.
This represents a 7% increase in stock price. Further, the additional leverage and return of excess cash to shareholders will significantly increase ROE. If the market determines that an 80% debt capital structure is feasible for BBBY, then we will expect further capital gains as investors applaud shareholder friendly policies and re-examine EPS estimates. However, if top line growth and same store sales growth continue to trend downward, investors may become skeptical of BBBY management’s ability to continue generating over 30% EPS growth, and thus question the ability of the company to service its debt in the future.
During the time of the case Bed Bath & Beyond (BBBY) was on top of the competition with never missing earnings estimates and constant store expansions. Both their top line and bottom line growth was impressive, especially when compared to competitors. Their expansions were being financed with a large percentage of cash and a small percentage of debt. The debt they did incur was payed off rather quickly leading to high cash accounts in their books. However, this created a problem for BBBY, as many analysts and investors considered the pile of cash to be rather unproductive. Analyst stated that the growing cash position was deteriorating the firms return on equity and the firm could improve shareholder return by adding debt to the firm. So, a question arose as to how BBBY should use that cash and whether they
years, sales had increased at a 7% compound rate, while earnings, benefiting from substantial cost
Rajat Singh, a managing director at Hudson Bancorp, needs to find a way to rejuvenate the paper check corporation. One main part that needs to be calculated is the appropriate mixture of debt and equity for the firm. The company needs to determine the correct mixture so that they can both minimize the cost of capital and increase the shareholders value. I will analyze the current and future situation of the company, trying to find the correct credit rating to use that will increase income. With the new credit rating, I will be able to recommend a certain amount of debt for the company to take on and be profitable.
Balance sheet show that Comerica’s total deposits are maintaining a level since 2005, however company’s net loans have increased by almost $10 Billion. Balance sheet clearly shows that these loans are finance from the increase in short-term and long term debt, which cast doubts on the profitability of company going forward.
Cash on hand is $398 million. This is only a $110 million increase from December 31, 1999. This means relatively little, as the cash flows for the corporation is what really matters.
The management team expected the performance index to be high this period. And as expected, the goal was reached with an asset administration of 20.9%. Because of the goal set the decisions taken allowed the bank to increase its asset