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4-1 Consulting Report: Analysis of Financial Performance
Dustin Calvert
Southern New Hampshire University
MBA 500: Building Business Leaders
Dr. Jarrett Walton
July 3, 2022
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The following consulting report has been drafted to assess the financial health of ABC
Beauty Company as the company continues to transition its strategies to target the Triple
Bottom Line (TBL). Further analysis has been done to compare ABC’s progress using
financial statements from Toyota Motor Corporation (TMC) as a litmus test for success.
Key Financial Performance Indicators
The definition of financial success varies by stakeholder. The following analysis
identifies key financial performance indicators for three unique stakeholder groups.
Employees
The employees of ABC bring corporate vision and strategies to life. To retain talent
and attract future employees, ABC should highlight its positive Net Profit Margin to indicate
the strength of its growth and potential for future employees.
Net Profit Margin=Net Income
Net Sales Revenue
The Net Profit Margin trends for ABC (ABC Beauty Company, 2018b) have been
plotted against data derived from Toyota’s financial statements (Toyota Motor Corporation,
2019) in Figure 1 below. ABC has improved its Net Profit Margin in the last fiscal year and is
performing favorably when compared to Toyota.
2016 2017 2018
0.0500
0.0600
0.0700
0.0800
0.0900
0.1000
0.1100
0.0829 0.0762
0.1066
0.0814
0.0664
0.0849
Net Profit Margin Ratio
ABC TMC
Figure 1 – Net Profit Margin comparison of ABC Beauty Company and Toyota Motor Corporation
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Shareholders
ABC Beauty Company’s shareholders are invested in the future of the company and
desire to see actions that reflect long-term stability. Stability can be measured with a Debt-to-
Equity Ratio. The data in Figure 2 reflects that ABC Beauty Company is now financing its
future growth by leveraging its debt (ABC Beauty Company, 2018a), on par with Toyota
(Toyota Motor Corporation, 2019).
2016 2017 2018
0.0000
0.5000
1.0000
1.5000
2.0000
0.3961 0.6394
1.3751
1.6662 1.6544 1.5639
Debt to Equity Ratio
ABC TMC
Figure 2 – Debt to Equity Ratio comparison of ABC Beauty Company and Toyota Motor Corporation
Community Groups
Having shifted to strategies to pursue a Triple Bottom Line, ABC Beauty Company
should financially reflect its dedication “[t]o be a global contributor to the communities we
operate in” (Hernandez, 2022). ABC Beauty Company’s commitment to its pledge can be
quantified using a Charity to Profit Ratio.
Charity ¿Profit Ratio=Total Donations
Gross Profit
The data in Figure 3 shows that despite ABC Beauty Company’s financial success over
the past year, the company has failed to match pace with its past contributions (ABC Beauty
Company, 2018c). ABC Beauty Company would need to increase donations to move towards
meeting their expressed intention in their Triple Bottom Line plan.
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2016 2017 2018
0.56%
0.60%
0.64%
0.68%
0.72%
0.73% 0.73%
0.62%
Charity to Profit Ratio
Figure 3 – Charity to Profit Ratio of ABC Beauty Company
Key Financial Line Items Related to TBL
Beyond the measures previously described, there are other financial line items that
ABC Beauty Company can reflect on to ensure that the organization is staying true to its
commitment to the Triple Bottom Line.
Salary Expenses: Providing current employees with a competitive salary
simultaneously aims to retain talent and attract future employees.
Retained Earnings: Money that would otherwise go directly to shareholders can be
invested into ABC’s 100% sustainable packaging plan or production infrastructure that
reduces the company’s carbon footprint.
Deferred Revenue: ABC Beauty Company should be looking for an increase in
deferred revenue, which could be a leading indicator for future profit if it is a result of
increased subscriptions and product orders. Conversely, a decline in deferred revenue could
highlight a positive impact in increased product output exceeding customer demand.
Conclusion
ABC Beauty Company’s investments and strategic decisions have delivered a profit
margin that provides the organization with the flexibility to pursue further investment into the
community, sustainability, and internal growth.
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References
ABC Beauty Company. (2018a).=Consolidated Balance Sheet for Rewards Program Product
Line.
ABC Beauty Company. (2018b).=Consolidated Cash Flow Statement for Rewards Program
Product Line.
ABC Beauty Company. (2018c).=Consolidated Income Statement for Rewards Product Line.
Hernandez, A. (2022).=Triple Bottom Line Plan
Toyota Motor Corporation. (2019).=Summary of Financial Results for FY2018.
https://global.toyota/pages/global_toyota/ir/financial-results/archives/en/
May_9_2018_summary.pdf
