Financial Analysis



Custom Snowboards Inc

PART 1:

A. Report Presentation to Chief Financial Officer

The management of Custom Snowboards, Inc. is considering an expansion to Europe as it is expected that sales in Europe will continue. In order to prepare the report for the chief financial officer (CFO) to present to the bank vice president so that company can get an approval of $1,000,000. The final approval comprises of the following things:

Financial Highlights

The financial position of the company has certain points which can impact on the decision of the loan officer. The main decision is related to the repayment of the debt.

Vertical analysis shows the items relationship with the base amount and this base amount is sales. Custom Snowboards Inc indicates gross profit has been constant since year 12 year to year 14 while operating expenses are also constant from year 12 to year 14 which state that company has maintained the sales and operating expenses ratios steady with sales. As far as general and administrative expenses are concern, this has increase from year 12 to year 14 i.e. 14.7% to 16%. Hence, operating income has been reducing from year 12 (3.9%) to year 14 (2.6%) due to increase in general and administrative expenses (Jerry J., Paul D., Donald E., 2011).

Company also experiencing a reducing trend in EBIT from 2.6% to 1.5% in year 12 and year 14 respectively, while, net income is also declines with respect to yearly sales. Current assets in year 14 higher than year 12 with 16% and 7% respectively, fixed assets also improved as company has invested again in year 14 compared to year 13. Total debt and liabilities reduced in year 14 to 48.5%, while it was 52.2% in year 13 and 57% in year 12. Retain earning was improved with respect to total assets in year 14 i.e. 18% while it was 8.5% in year 12 and 14.3% in year 13. This shows that company has been maintaining the sufficient cash for hard times.

The horizontal analysis shows dollars changes on yearly basis. Net sales and gross profit trend has been reducing since year 12 while, total expenses has also been decreasing since year 12 to year 14 which is a good indication for investors and other stakeholders. As far as operating expenses are concern, the trend has been reducing from 7.24% in year 13 to 6.5% in year 14. Operating income has been adversely affected in year 13 with decline of 11.98% and 19.20% in year 14. Net earnings have also been affected with negative trend of 14.42% in year 13 and 27.79% in year 41 (Gradl, Youngblood, Componation, & Gholston, 2009).

Balance Sheet items are also partially declining. In year 13 current assets increased in year 13 with 21.5% while it reduces in year 14 with 8.3%. Total assets have been reduced from 3.3% to 1.5% in year 14. Total liabilities has been reducing which is good for company in these three years and retain earnings in year 13 increased by ...