O.M Scott & Sons Case

1551 Words7 Pages
A Case Study on
O.M Scott & Sons Co.

Table of Contents
Objective……………………………………………………….…………1
Company Background……………………………………………………1
Ratio Analysis…………………………………………………………….1
Pro Forma Analysis……………………………………………………….3
Sensitivity Analysis……………………………………………………….3
Recommendations for Management………………………………………4
Summary of Case Study…………………………………………………..4
Appendix………………………………………………………………….5

Objective
This paper will seek to analyze the financial statements of the O.M Scott & Sons Company during the years 1957-1961, in order to provide readers with a thorough understanding of the various factors that may influence the future success of this business. Additionally, recommendations based on an analysis of their financial
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Leverage and liquidity ratios in respect to the O.M Scott & Sons Company vary widely. The overall liquidity of the company does not indicate that lack of cash will impede their operational ability. Although the current ratio increases to a high of 4.2999 in 1960, their ability to meet short-term obligations should not be affected. However, it may indicate that there is too much inventory or cash could be better spent in other areas of the business. The financial leverage ratio increases from a low of .5335 in 1957, to a high of 1.3928 in 1961. This change shows that the company is becoming more dependent on using debt to finance its assets.
Pro Forma Analysis
In terms of the financial outlook for the O.M Scott & Sons Company for the next few years, there are several notable changes that occur as a result of the changes management enacted through 1957-1961. It is important to note that both the pro forma income statement and balance sheet assume a 23.5% annual compounded growth figure based on the years stated earlier. Emphasis will be placed on forecasted numbers for the years 1962-1964 in order to provide readers with projected figures established through several key assumptions. Cost of goods sold will continue to be an area that further increases as a result of management decisions. We estimate that COGS will increase from 42389.35 to 64621.89, which is an
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