Anandam Manufacturing Company: Analysis of Financial Statements
Srahman96
PowerPointExamplecasestudy.pptxC&A Wholesale Distributors Company Analysis
University of Houston, FINA 4343
C&A Wholesale Distributors – Who They Are
Founded in the 1930’s by Mr. E. Larson
Electronic components distribution company that primarily serves large commercial builders and contractors
Based in Houston, TX – Company has experienced steady growth over the last 3 years.
Clients are US based but the company has attempted to enter more international markets.
Current Ownership
(Family Limited Partnership)
Carlos Lopez – Chief Operating Officer
Background in Finance and Retail
Handles daily operations & Manages employees
Has experience in managing a large retail business in the Southeast US for large home improvement company
Alexandra Lopez – Chief Executive
Expertise in seeking out new business opportunities
Innovator and visionary of the company
The Industry
The industry they operate in is growing as the demand for technology increases, more demand means more need for updated electrical components.
All distributors have to change their offerings as client’s needs change or they will be overtaken by competitors.
In order to compete with the changing markets, C&A will have to offer competitive pricing to their product lines.
Company’s Recent Financials
C&A has a $45mm working capital facility that is currently outstanding.
Recently acquired failing competitors inventory at vast discount (paid cash)
2015 Statements reflected the enormous purchase.
2016 numbers are back in order however company continues to borrow at near capacity
| Strengths Client relations and operations are growing C&A has been operational for 75+ years Quality of products has been great over the years, as has customer service. | Weaknesses Constructing a new warehouse and overhauling equipment could hinder current operations and decrease sales short term. The cost of their venture, new real estate and new equipment will be expensive. |
| Opportunities With new equipment comes increased efficiency and productivity long term As the demand for more components increase, their new facilities will help them compete. | Threats The market is very competitive Technology is evolving almost faster than companies can keep up. Economy can be unpredictable. |
SWOT Analysis
Five C’s of Credit Overview
Character - C&A has been on a good long standing relationship with the bank
Capacity - The company borrows near capacity, They do have a $45 mm working capital facility that is operational
Capital – Their largest contribution of paid in capital was in 2017
Collateral – Their real estate, their only real option for collateral
Conditions – The economy is looking up for them and with the new purchase the company sees growth ahead
A New Opportunity For C&A
After the company acquired their competitors inventory; new real estate near the existing warehouse opened up.
C&A wants to expand out there and believes it to be a huge step in their growth.
The move would require purchase of the land, new warehouse construction, and upgraded equipment.
Conditions – Use of Loan
Larger Warehouse - $15-20mm
Current setup is strained with the new purchase of inventory coming in.
Upgraded Equipment - $7-8mm
Current equipment not set up to handle new loads of inventory and future operations.
Purchase of Property - $12mm
Land is available to purchase for C&A growth
Loan Continued
Max $40mm
Needed to fund C&A’s new venture
Primary Source is Cash Flow from Operations.
Secondary Source: Collateral - C&A has their current a $45mm working capital facility that is currently outstanding
Also C&A has their current inventory, equipment, and receivables to put up
Repayment Options:
Income Statements
Through recent historical data and the statements we can see that sales have grown over the last two years.
COGS has steadied at an avg. figure of about 80% of total sales
Sales increased by about 19% in 2016 and shot up 30% in 2017.
Their net income was hit hard in 2016 because of the purchase of their competitors inventory and other SG&A expenses.
Balance Sheet Info
Cash flow increased by about 47% in 2017.
According to the sheets inventory rapidly went up by 48% in 2016
Not much activity or change was recorded in Accts. Rec.
Their working capital has stayed pretty high over the 3 years recorded.
Sales Graphs
CA Wholesale Sales Figures
CA Wholesale Sales Fgures 2017 2016 2015 39001100 30813300 26164400
Cash Flow Statements
Cash flow for the years were $105,000 for 2016 and in 2017 it was $1,412,000
Their cash flow from operations in 2016 came to around $16,580,000
In 2016 there was a huge purchase by the company which was reflected in 2016s cash flow statement.
Cash flow from operations was $9,577,000 in 2017
Ratios
Total asset turnover went up from 2.71 to 2.96 in 2016-2017 showing that
They got more sales for what assets they used
Ratios decreased over the years
Decision
Supply the company the loan
They have good growth, cash flow and tons of collateral. Along with a good track record with the bank.
| C&A Wholesale Distributers, LLC | Historical | Historical | Historical | |||
| Audited | 2015 | 2016 | 2017 | |||
| Financial Ratios | $1,000 | $1,000 | $1,000 | |||
| Liquidity Ratios | ||||||
| Current Ratio | 2.01 | 2.30 | 2.08 | |||
| Quick Ratio | 0.88 | 0.85 | 0.74 | |||
| Days (2015) | Times (2015) | Days (2016) | Times (2016) | Days (2017) | Times (2017) | |
| Days Cash | 4.19 | 3.43 | 4.03 | |||
| Days Accounts Receivable | 50.85 | 47.08 | 37.78 | |||
| Days Inventory | 87.07 | 102.87 | 90.43 | |||
| Cash-to-Cash Asset Cycle | 142.11 | 153.39 | 132.25 | |||
| Days Accounts Payable Outstanding | - | 48.50 | 51.82 | |||
| Days Cash-to-Cash Cycle | - | 104.89 | 80.43 | |||
| Days Accruals | 108.07 | 94.62 | 80.70 | |||
| Est. W.C. Financing Needs | - | $7,199.34 | $238.33 | |||
| Leverage Ratios | Percent (2015) | Times (2015) | Percent (2016) | Times (2016) | Percent (2017) | Times (2017) |
| Debt to Tangible Net Worth | 3.68 | 2.01 | 1.97 | |||
| Times Interest Earned | 19.45 | 2.71 | 20.40 | |||
| Fixed Charge Coverage | 1.22 | 1.02 | 1.24 | |||
| Net Fixed Assets to Tangible Net Worth | 36.92% | 20% | 19% | |||
| Dividend Payout | 98% | 49.79% | -2.87% | |||
| Probability Ratios | Percent (2015) | Times (2015) | Percent (2016) | Times (2016) | Percent (2017) | Times (2017) |
| Return on Net Worth (ROE) | 23% | 1.11% | 11% | |||
| Profit Before taxes to Net Worth | 36.30% | 1.72% | 16.78% | |||
| Return on Assets (ROA) | 5% | 0.37% | 3.65% | |||
| Profit Before Taxes to Total Assets | 7.76% | 0.57% | 5.65% | |||
| Equity Multiplier | 4.68 | 3.01 | 2.97 | |||
| Income | ||||||
| Total Asset Turnover | 2.60 | 2.43 | 2.85 | |||
| All Other Income/Total Assets | 0.02% | 0.03% | 0.04% | |||
| Expenses | ||||||
| Net Profit Margin | 1.92% | 0.15% | 1.28% | |||
| COGS/Net Sales | 79.76% | 83.05% | 82.56% | |||
| Operating Expenses/Net Sales | 17.10% | 16.59% | 15.36% | |||
| Income Taxes to Earnings Before Taxes | 35.49% | 35.55% | 35.51% | |||
| Sales/Net Fixed Assets | 32.97 | 37.31 | 44.15 | |||
| Cash-Flow Ratios | Times (2015) | Times (2016) | Times (2017) | |||
| CFO/(DIV + Last CMLTD) | NA | -0.48 | 0.30 | |||
| CFO/(DIV + Last CMLTD + Bank notes) | NA | -0.49 | 0.31 |
| C&A Wholesale Distributors, LLC | |||
| Balance Sheet | |||
| All Figures in 000s | 2017 | 2016 | 2015 |
| Assets | |||
| Current Assets: | |||
| Cash | $4,306 | $2,899 | $3,005 |
| Accounts Receivable | $40,371 | $39,749 | $36,451 |
| Inventory | $79,783 | $72,126 | $49,783 |
| Prepaids | $570 | $502 | $420 |
| Total Current Assets | $125,030 | $115,276 | $89,659 |
| Property and Equipment | $11,261 | $10,875 | $10,567 |
| Other Assets | $591 | $403 | $387 |
| Total Assets | $136,882 | $126,554 | $100,613 |
| Liabilities | |||
| Current Liabilities: | |||
| Trade Accounts Payable | $46,801 | $36,975 | $31,397 |
| Accrued and Other Liabilities | $13,248 | $13,248 | $13,248 |
| Total Current Liabilities | $60,049 | $50,223 | $44,645 |
| Liabilities and Owner's Equity | |||
| Debt | $30,194 | $33,278 | $34,225 |
| Other Long-Term Obligations | $516 | $1,001 | $245 |
| Total Liabilities | $90,759 | $84,502 | $79,115 |
| Owner's Equity | |||
| C&A Family Equity | $30,989 | $41,818 | $21,397 |
| Paid-In Capital | $10,000 | - | - |
| Retained Earnings | $5,134 | $234 | $101 |
| C&A Wholesale Distributors, LLC | |||
| Balance Sheet | |||
| All Figures in 000s | 44553.29245 | 40952.9717 | 30559.98113 |
| C&A Wholesale Distributors, LLC | |||
| Audited | 2015 | 2016 | 2017 |
| Cash-Based Income Statement | $1,000 | $1,000 | $1,000 |
| Net Sales | $261,644.00 | $308,133.00 | $390,011.00 |
| Change in accounts receivable | - | $3,298.00 | $622.00 |
| Cash receipts from sales | - | $304,835.00 | $389,389.00 |
| Cost of goods sold | $208,694.00 | $255,916.00 | $322,009.00 |
| Change in inventory | - | $22,343.00 | $7,657.00 |
| Change in accounts payable | - | $5,578.00 | $9,826.00 |
| Cash purchases | - | $272,681.00 | $319,840.00 |
| Cash margin | - | $32,154.00 | $69,549.00 |
| Total operating expenses | $44,744.00 | $51,105.00 | $59,920.00 |
| Depreciation and amortization | $3,018.00 | $3,019.00 | $3,018.00 |
| Change in prepaid expenses | - | $82.00 | $68.00 |
| Change in accruals | - | $- | $- |
| Change in other current assets and liabilities | - | $16.00 | $188.00 |
| Cash operating expenses | - | $48,184.00 | $57,158.00 |
| Cash operating profit | - | -$16,030.00 | $12,391.00 |
| Interest on marketable securities | $21.00 | $35.00 | $56.00 |
| Income on long-term investments | - | $- | $- |
| All other expenses and income (net) | - | $- | $- |
| Cash before interest and taxes | - | -$15,995.00 | $12,447.00 |
| Interest expense- Bank notes | $423.00 | $424.00 | $399.00 |
| Interest expense- Term notes + LTD | $- | $- | $- |
| Income taxes reported | $2,770.00 | $257.00 | $2,748.00 |
| Change in income tax payable | - | $- | $- |
| Change in deferred income taxes | - | $- | $- |
| Cash flow from operations (CFO) | - | -$16,676.00 | $9,300.00 |
Year201720162015
Debt Ratio0.660.670.79
