FINC600 Week 5 Financial Statement Analysis Application

Given all of the financial analyses that you have completed, in what direction would you recommend Tony Fortune take the company?

Be sure to justify your answers using both qualitative and quantitative analysis (with the help of financial figures from your financial statements).

Financial Statement Analysis
Danita Parker
Colorado Technical University
January 22, 2023
Financial Statement Analysis
I employed horizontal analysis to examine the similarities and differences between EEV’s
operating performance and its financial accounts. I have compared the net sales from one year to
the next, in addition to the sales volume of equipment and parts, to identify any potential shifts
that may have occurred. I have also compared the various equipment and parts to the total profit
margin to observe what shifts have occurred from 2008 to 2009, 2009 to 2010, and finally, 2008
to 2010. However, this was done to see how the overall profit margin has changed throughout the
three years. In addition, I have conducted a comparative analysis of the sales volume to the
headcount to discover any shifts in the number of sales made per employee. By carrying out
these actions, I have been able to determine whether or not there have been any shifts in the
company’s financial condition, and I have improved my comprehension of the company’s
performance and profitability. In addition, I can evaluate any potential hazards that may be
affecting the firm’s performance and ensure that the company is running effectively and
efficiently.
From 2008 to 2010, the company’s annual net sales showed a gain in revenue, increasing
from $98,000 to $113,000, equivalent to an increase of 12.95%. When comparing one year to the
next, it looks like 2009 was a slower year, but 2010 saw a more significant gain in sales than the
previous year. It may indicate that the firm is getting more lucrative and doing well; however, it
is essential to consider other aspects, such as operations, to understand the company’s financial
performance comprehensively.
Between 2008 and 2010, there was an increase of 28.86% in the total sales volume. When
looking at sales from one year to the next, however, we see that the overall sales from 2009 to
2010 were lower than the total sales from 2008 to 2009. In particular, the sales volume increased
by 15.89% between the years 2008 and 2009, whereas the rise was only 13.96% between 2009
and 2010. It leads one to believe that 2009 may have been fraught with difficulties. When
comparing the sales of equipment from one year to the next, we see that between 2008 and 2009,
there was a 6.74% increase in sales, and between 2009 and 2010, there was an 11.88% increase
in sales, which resulted in a total increase of 17.81% between 2008 and 2010. It demonstrates
that the sales of various pieces of equipment have been consistently growing, which is an
indication that points toward a positive outcome. However, if we look at the parts side of the
business, the sales volume climbed by 9.15% between 2008 and 2009, but it witnessed only
growth of 2.09% between 2009 and 2010, giving an overall change of 11.04% from 2008 to
2010. This suggests that the decline in revenue is more pronounced in the parts industry. [Cause
and effect]
An analysis of the operations’ equipment and parts divisions can provide information
regarding the company’s finances. We can acquire a more nuanced comprehension of the
financial viability of each product if the facts are itemized and the research process is carried out
utilizing the appropriate software. When comparing the percentage of profit contributed by each
product from 2008 to 2009, 2009 to 2010, and overall from 2008 to 2010, we see that televisions
held a 25% contribution to profitability in 2008, 25% in 2009, and 21% in 2010. This was the
case throughout the period from 2008 to 2010. The profit margin for televisions fell by 6% in
2008 compared to the overall profit margin for the year. The performance of televisions was
slightly improved in 2009, with sales only falling by 2%, but they were up 4% from the previous
year. The sales of televisions in 2010 were 2% higher than in 2008, but they were 6% lower than
the previous year, for a total drop of 8%.
In 2008, the automobile market fell by 10%, while the markets for computers and
medical equipment rose by 17% and 34%, respectively, with the medical equipment market
being the sector that contributed the most revenue for the year. This pattern was maintained in
2009, with a minor decline in contribution across all industries, except for the automotive
industry, which maintained its 10% decline in contribution. Computers and medical equipment
held respective shares of 44% and 57% of the contributions, with medical equipment again being
the most significant contributor, having increased its share by 29%. In 2010, contributions from
computers and medical equipment were closer, coming in at 43% and 45%, respectively.
Additionally, computer and medical equipment contributions increased by 14% and 16%,
respectively, in 2010. The contribution from the automotive industry remained unchanged at
10% lower in 2010.
Since 2008, the overall profit margin for the equipment sector has experienced a
reduction of 2%, and from 2009 to 2010, that margin experienced a decline of 3%. This trend is
continuing in a sluggish but consistent manner. From this, 2009 was not without its challenges,
and the performance of the television industry continues to be erratic, which is a cause for
concern. In addition, the contribution from the automotive sector has been falling by a steady
10% annually for the past many years.
Within the parts industry, the only components that routinely produce results that are
superior to their contribution to the overall profit margin are the medical components. Every
year, each item’s performance is either a little better or slightly worse than the previous year, but
there are no significant shifts. When looking at the entire profit margin from 2008 and comparing
it to the margin in 2010, we can see that it has decreased by 8%. It suggests that the parts sector
needs to be fixed, and the medical sector cannot create sufficient quantities to compensate for the
deficiencies in the performance of other things.
When comparing the total headcount of the company to the net sales of the business, it is
essential to remember that the amount sold per head may be calculated by dividing the total net
sales by the total headcount. For instance, in 2008, there were 2400 employees, and the company
had a net sales volume of $98,800; this equates to a salary of $41.17 per employee. The
following year, the headcount was 2750, which, compared to the previous year as a point of
reference, indicates that the net sales were similar to $113,217.50. However, the total net sales
for 2009 were only $108,000, which indicates a decline of 4.56% in sales per individual. 2010
saw an increase in staff to 2900, which should have resulted in net sales of approximately
$119,393, according to projections. However, they only managed to attain a total of $113,500,
which is 0.34% less per person than in 2009.
It is, therefore, evident that having a more extensive staff will increase overhead costs but
should also increase sales. Despite this, the business continues to turn a profit. It is essential to
evaluate any efficiency issues, training issues, or even external events beyond the company’s
control and affecting supply and demand to understand better what is causing the decrease. It
will allow one to understand better what is causing the decrease. It would be beneficial to acquire
a broader perspective by consulting the financial data from previous years to evaluate whether
the problem that occurred in 2009-2010 was an isolated incident or a recurring problem.
Electronic Equipment Venture
Balance Sheet
(In Thousands)
2008
2009 2010 Fcst
Assets
Cash
Accounts Receivables
Inventory
Total Current Assets
300
5400
6700
12400
130
6700
9000
15830
100
8800
12000
20900
Net Plant & Equipment
Total Assets
1500
13900
1530
17360
1700
22600
Liabilities
Accounts Payables
Notes Payables
Accured Taxes
Current portion of long-term Debt
Total Current Liabilities
3000
450
300
200
3950
3100
600
350
200
4250
4800
1200
900
200
7100
Long-term Debt
Shareholders equity
Total Liabilities and Net Worth
1800
8150
13900
1700
11410
17360
1600
13900
22600
FIN600
Assignment List B
Electronic Equipment Venture
Income Statement
Thousands
2008
98800
2009 2010 (Fsct)
108000
113500
68500
30300
31%
80250
27750
26%
85425
28075
25%
Expenses
General & Administrative
Marketing
Operating Expense
Total Expenses
3500
7500
9900
20900
5300
8500
10610
24410
5700
9000
11120
25820
Income Before Taxes
Taxes
Net Income
9400
3760
5640
3340
1336
2004
2255
902
1353
Headcount
Direct
Indirect
Total Headcount
2080
320
2400
2400
350
2750
2500
400
2900
Net Sales
Cost of good sold
Total cost of good sold
Gross Profit
%
Products
Sales
Electronic Equipment
Television
4000
Computers
5000
Medical
2300
Automotive
15000
Electronic Equipment Total
26300
2008
Margin
%
Sales
2009
Margin
%
1000
2400
1500
3200
8100
25%
48%
65%
21%
31%
3500
5200
3500
16000
28200
900
2300
2000
2800
8000
26%
44%
57%
18%
28%
Electronic Equipment Parts
Television
12000
3200
Computers
44500
13000
Medical
6000
3500
Automotive
10000
2500
Electronic Equipment Parts
72500
Total 22200
27%
29%
58%
25%
31%
13000
50000
7000
9800
79800
3050
10500
3700
2500
19750
23%
21%
53%
26%
25%
Total
31%
108000
27750
26%
98800
30300
Sales
2010 Fcst
Margin
%
5000
7600
4000
15400
32000
1045
3300
1800
3000
9145
21%
43%
45%
19%
29%
12000
48000
7500
14000
81500
2230
10500
3700
2500
18930
19%
22%
49%
18%
23%
113500
28075
25%
2008
Amounts
Liquidity ratios
Current Ratio
Current Assets
Current Liabilities
Quick Ratio, or
“Acid Test”
12400
=
Quick Assets *
Current Liabilities
3,950
5700.000
3950
* Quick assets include Cash, Marketable Securities, and Accounts Receivable
Asset Management Ratios
Inventory
Turnover
Cost of Goods Sold
Inventory
68,500
6,700
Accts receivable
Avg. daily sales
[Sales/365 days]
5400.000
270.680
#NAME?
Number of days
to Collect
Debt (Leverage) (Long-term Solvency) Ratios
Debt to
Assets
Total Liabilities
Total Assets
5750.000
13900.000
Debt to
Equity
Total Liabilities
Total Equity
5750.000
8150.000
Profitability Ratios (not applicable if net loss)
Profit Margin
on Sales (%)
Net Income
Sales
5640.000
98800.000
Gross Profit
on Sales (%)
Gross Profit
Sales
30300.000
98800.000
Return
on Assets (%)
Net Income
Total Assets
5640.000
13900.000
Return
on Equity (%)
Net Income
Equity
5640.000
8150.000
2009
Answer
=
2010
Amounts
3.14
15,830
4,250
1.44
Answer
=
3.72
20,900
7,100
6830.000
4250
1.61
8,900
7100
10.22
80,250
9,000
8.92
85,425
12000
19.95
6700
295.890
22.64
8800
310.95
0.4
5,950
17,360
0.3
8700
22,600
0.7
5,950
11,410
0.5
8700
13,900
5.7%
2,004
108,000
1.9%
1,353
113,500
30.7%
27,750
108,000
25.7%
28,075
113,500
40.6%
2,004
17,360
11.5%
1,353
22,600
69.2%
2,004
11,410
17.6%
1,353
13,900
2.943662
1.253521
7.11875
28.30037
0.384956
0.625899
1.19%
24.74%
5.99%
9.7%
Electronic Equipment Venture
Balance Sheet
(In Thousands)
2008
2009 2010 Fcst
Assets
Cash
Accounts Receivables
Inventory
Total Current Assets
300
5400
6700
12400
130
6700
9000
15830
100
8800
12000
20900
Net Plant & Equipment
Total Assets
1500
13900
1530
17360
1700
22600
Liabilities
Accounts Payables
Notes Payables
Accured Taxes
Current portion of long-term Debt
Total Current Liabilities
3000
450
300
200
3950
3100
600
350
200
4250
4800
1200
900
200
7100
Long-term Debt
Shareholders equity
Total Liabilities and Net Worth
1800
8150
13900
1700
11410
17360
1600
13900
22600
FIN600
Assignment List B
Electronic Equipment Venture
Income Statement
Thousands
2008
98800
2009 2010 (Fsct)
108000
113500
68500
30300
31%
80250
27750
26%
85425
28075
25%
Expenses
General & Administrative
Marketing
Operating Expense
Total Expenses
3500
7500
9900
20900
5300
8500
10610
24410
5700
9000
11120
25820
Income Before Taxes
Taxes
Net Income
9400
3760
5640
3340
1336
2004
2255
902
1353
Headcount
Direct
Indirect
Total Headcount
2080
320
2400
2400
350
2750
2500
400
2900
Net Sales
Cost of good sold
Total cost of good sold
Gross Profit
%
Products
Sales
Electronic Equipment
Television
4000
Computers
5000
Medical
2300
Automotive
15000
Electronic Equipment Total
26300
2008
Margin
%
Sales
2009
Margin
%
1000
2400
1500
3200
8100
25%
48%
65%
21%
31%
3500
5200
3500
16000
28200
900
2300
2000
2800
8000
26%
44%
57%
18%
28%
Electronic Equipment Parts
Television
12000
3200
Computers
44500
13000
Medical
6000
3500
Automotive
10000
2500
Electronic Equipment Parts
72500
Total 22200
27%
29%
58%
25%
31%
13000
50000
7000
9800
79800
3050
10500
3700
2500
19750
23%
21%
53%
26%
25%
Total
31%
108000
27750
26%
98800
30300
Sales
2010 Fcst
Margin
%
5000
7600
4000
15400
32000
1045
3300
1800
3000
9145
21%
43%
45%
19%
29%
12000
48000
7500
14000
81500
2230
10500
3700
2500
18930
19%
22%
49%
18%
23%
113500
28075
25%
2008
Amounts
Liquidity ratios
Current Ratio
Current Assets
Current Liabilities
Quick Ratio, or
“Acid Test”
12400
=
Quick Assets *
Current Liabilities
3,950
5700.000
3950
* Quick assets include Cash, Marketable Securities, and Accounts Receivable
Asset Management Ratios
Inventory
Turnover
Cost of Goods Sold
Inventory
68,500
6,700
Accts receivable
Avg. daily sales
[Sales/365 days]
5400.000
270.680
#NAME?
Number of days
to Collect
Debt (Leverage) (Long-term Solvency) Ratios
Debt to
Assets
Total Liabilities
Total Assets
5750.000
13900.000
Debt to
Equity
Total Liabilities
Total Equity
5750.000
8150.000
Profitability Ratios (not applicable if net loss)
Profit Margin
on Sales (%)
Net Income
Sales
5640.000
98800.000
Gross Profit
on Sales (%)
Gross Profit
Sales
30300.000
98800.000
Return
on Assets (%)
Net Income
Total Assets
5640.000
13900.000
Return
on Equity (%)
Net Income
Equity
5640.000
8150.000
2009
Answer
=
2010
Amounts
3.14
15,830
4,250
1.44
Answer
=
3.72
20,900
7,100
6830.000
4250
1.61
8,900
7100
10.22
80,250
9,000
8.92
85,425
12000
19.95
6700
295.890
22.64
8800
310.95
0.4
5,950
17,360
0.3
8700
22,600
0.7
5,950
11,410
0.5
8700
13,900
5.7%
2,004
108,000
1.9%
1,353
113,500
30.7%
27,750
108,000
25.7%
28,075
113,500
40.6%
2,004
17,360
11.5%
1,353
22,600
69.2%
2,004
11,410
17.6%
1,353
13,900
2.943662
1.253521
7.11875
28.30037
0.384956
0.625899
1.19%
24.74%
5.99%
9.7%
SWOT Analysis of Electronic
Equipment Venture (EEV)
Danita M. Parker
Colorado Technical University
February 5, 2023
Objective
 Introduction of SWOT Analysis
 Presenting financial statements used in the analysis.
 Key financial ratios used in the analysis.
 SWOT Analysis highlighting
 Strengths
 Weaknesses
 Opportunities
 Threats
 Risk analysis for the company
 Recommendations
Introduction
 SWOT analysis is a technique used to help
management in determining firm’s
strengths, weaknesses, opportunities, as
well as, threats.
 SWOT analysis in this presentations is
informed by financial ratio analysis using
company’s financial statements.
 As well, risk analysis conducted and assist
in providing recommendations.
 The financial ratio analysis included are
profitability, activity, liquidity, as well as
leverage ratios.
Financial Statements
Balance Sheet and Income Statement
for EEV company are provided for this
analysis.
Balance sheet help to indicate the
company’s liabilities, equity, as well as
assets.
Income statement helps to indicate
EEV company’s revenue, expenses, as
well as income.
Financial Ratios
 The key financial ratios used in
SWOT analysis include:
 Profitability ratios
 Activity ratios
 Liquidity ratios
 Leverage ratios
SWOT Analysis
EEV strengths
 Effective use of assets –activity ratios reveals
that the company is effective in utilizing it
resources.
 Profitable investments- The company generates
revenues for its shareholders
SWOT Analysis
EEV Weakness
 Rising and availability of debts
 Decline in revenue generations over the years.
 Minimum growth of earnings
SWOT Analysis
EEV Opportunities
 Opportunity to invest more.
 Room for expansions
 Enhance income stability
 Chance to reduce expenses to increase revenue
SWOT Analysis
EEV Threats
 Huge debts
 Lack of liquidity present threat to income
Risk Analysis For EEV
 The risk analysis reveals that the company has
huge debts, which has the following impacts:
Debt increases reduce the company’s potential
for expansion.
Debt limits one’s ability to increase
investment.
Recommendation for the Company
 Reduce borrowing.
 Finance assets using equity.
 Decline expenses to increase income.
 Update the financial statements, that is, balance sheet
and income statements to monitor company’s progress.
Reflections
• Cunningham, B. M. (2011). Information
for business decisions. South Melbourne,
Vic: Cengage Learning Australia.
• Cunningham, B. M., Bazlley, J. D., Kavanagh,
M., Nikkolai, L. A., Simmons, S., & Slaughter,
G. (2015). Accounting: Information for
business decisions.