FINANCIAL ANALYSIS

Country Road Co.

Executive summary

The paper aims to analyze the financial performance of Country Roads Co.'s. While focusing on the company's overview, we will extend our discussion to the industry in which the company is operating, its trends and the key success factors of the company. In the next session, we are completely analyzing the financial statements of the company, and also computing the financial ratios of the company mainly profitability, liquidity and efficiency ratios and their interpretations. The balance sheet and income statement of the company is analyzed through vertical and horizontal analysis.Table of Contents

Overview of Country Road3

Australian Textile and Apparel Industry3

Business Strategies3

Key Success Factors4

Key Risk Factors4

Sustainability of Profits4

Financial statements analysis5

Analysis of the income statement5

Cash flow statement16

Ratio analysis19

Appendix22

Country Road Co.

Over view of Country Road

The country road company was started in 1974 as a supplier of cotton women shirts. The company made its success by offering quality apparels at lower prices. With an expansionary business strategy, the company expanded in to United States and Asian markets. However, due to lack of knowledge on product offering to the customers, the company had to exit from these markets. After an unsuccessful period the company adopted different business strategies and made a turnaround to regain the lost market position in Australian retail apparel market (Sorter, Ingberman, & Maximon, 1990).

Australian Textile and Apparel Industry

Australian apparel industry being a matured one is characterized by knowledgeable and selective customers. Small and medium sized industries are the major players in the industry. After the lifting of quantitative restrictions, China has captured major market share for low and medium end products, from the domestic manufacturers of apparels. Italy is competing in high-end designer products. With the global economic downturn, the industry outlook is bleak and is expected to decline over the next couple of years (Carleton & Lineberry, 2004, pp. 20-25).

Business Strategies

While at the early stages, Country Road adopted aggressive expansion strategy, after the unsuccessful period the company changed its strategy towards cautious expansion domestically with its own retail stores and concession stores in major supermarkets and chain stores. Offering high quality products at lower prices and retaining the customer loyalty and brand reputation is the key business strategy of the company (Beaver & Kettler, 2000, pp.325-349).

Key Success Factors

Maintaining commitments to the suppliers and sourcing merchandise cheaper, offering lower prices by passing on the cost saving without compromising quality, maintaining close rapport with a large customer base, lean inventory to face the economic challenge of downturn and pessimistic outlook with cautious expansion are the key success factors.

Key Risk Factors

Miserable future in apparel retailing due to continued economic downturn, stiff competition from China and Italy and the necessity to offer innovative, quality products at lower prices are the key risk factors.

Sustainability of Profits

Consistent growth in sales revenue, profits, continued operating cash flows, increase in total assets, lean inventory policy and ability to withstand the economic downturn successfully ensures the sustainability of profits by Country Road Analysis of financial statements of the company

Financial statements analysis

Analysis of the income statement

Country ...