Financial Analysis

In: Business and Management

Submitted By spjgreen
Words 6566
Pages 27
Task 5
Bank Request
A1. Key points of the company’s financial picture that could impact the bank officer’s decision.
Historical Income Statement from the past 3 years:
· Decrease in net sales from year 12. Sales decreased by $434,700 from year 12 to year 13 and only rebounded by $80,500 between year 13 and year 14. The lower level of sales results in a lower dollar amount for gross profit, which decreases the amount left to cover selling, general and administrative expenses and leads to lower operating income. The lower operating income leaves a smaller amount to service debt in the form of interest payments.

· Increase in total general and administrative cost when sales are declining – administrative salaries, executive compensation, utilities and other general and administrative expenses increased as net sales were declining.

· Decrease in operating income will impact ability to service debt.

· Decrease in Net Income will impact earnings per share.

Historical Balance Sheet for past 3 years:
· Decrease in short-term investments without increase in cash. Short term investments sold to purchase furniture fixtures and equipment.

· Decrease in net working capital.

· Cash used to increase furniture, fixtures and equipment, not revenue producing items. Increase in furniture, fixtures and equipment corresponds to increase in general and administrative expenses.
· Decrease in Net income results in decrease in earnings per share

Comparative Pro Forma Income Statements:
· Sales are projected to climb by approximately 75% over the 5 year period of the pro forma statements. The historical sales have been in decline from the base period year 12, while sales are expected to increase each year during the period of the pro forma statements.

· Gross profit is projected to be constant over the 5 year period of the pro forma statements.…...

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