Final Project paper finance

Abc company, Inc.

Established 1941

Written by:

Student name

Financial Accounting II: Mark Jonas

Table of Contents

Background Information …………………………………………………………… 3 – 4

Competitors and Industries …………………………………………………………. 4

Vertical Analysis ……………………………………………………………………. 4 – 5

Horizontal Analysis …………………………………………………………………. 5

Liquidity Ratios ……………………………………………………………………... 5

Asset Management Ratio ……………………………………………………………. 5

Solvency Ratios ………………………………………………………………………6

Profitability Ratios …………………………………………………………………... 6

Market Analysis ……………………………………………………………………... 6

Worth the Investment ………………………………………………………………... 6

References …………………………………………………………………………… 7

Background

“Transforming from international accessory business to global life-style brand” is the main goal of Abc company Inc. (Abc company.com) Abc company Inc. has been growing since it began in 1941. This company got its legs from the desire to be successful of six artisans in a Manhattan loft. Abc company began as a family-run workshop and has grown into a multinational corporation. Many people know of the name brand and what they have to offer but little know how it all started.

Since 1941 Abc company has spread to multiply countries with 500 stores in the United States alone. Asia has 400 directly-operated factories and stores as well as 20 in Europe. (Abc company.com). Abc company sells their products in their own stores and, as of today, has not made any wholesale/vendor agreements. The chairman and CEO, John Smith, and president and COO, John Doe, take pride in their products. They also do not franchise any of their stores in order to keep control of the value of their products.

Abc company Inc. offers fine accessories and gifts for women and men. These gifts include but are not limited to: small leather goods, footwear, outerwear, watches, weekend and travel accessories, scarfs, sun wear, fragrances, and jewelry. Most people know them for their purses and leather goods but they are so much more than that. These two products were their top source of income in 2013. The mission statement of Abc company Inc. is simple and to the point, “Abc company seeks to be the leading brand of quality lifestyle accessories offering classic, modern American styling”. (Abc company.com)

The atmosphere of Abc company is driven by their strong values. They live by five main values. The first, the brand is our touchstone, is described as, “… everything we make, advocate or engage in reflects the attributes of the brand”. Next, “we seek to establish long-term relationships based on trust and satisfaction” are the words used to put their customer satisfaction into perspective. Abc company believes in the integrity of their way of life. “We stand behind our products, staking our name and reputation on everything that we make”. (Abc company.com) The last two values that they live by are innovational drive and success built on collaboration. Abc company stands by their people and says that they flourish through them.

Abc company Inc. is a company that was built from the ground up based entirely on sweat and drive. The six original artisans set a standard back in 1941 in that Manhattan loft that is still the driving force behind their success today. Abc company was bought by the Sara Lee Corporation in 1985 and since then has flourished. This is a company that lives on strong values and still takes pride in their work.

Top Competitors: (Abc company, Inc.)

1. Dooney & Bourke, Inc.

2. kate spade LLC

3. Michael Kors (USA), Inc.

Top Industries: (Abc company, Inc.)

1. Apparel Accessories Manufacturing

2. Consumer Products Manufacturing

3. Apparel Manufacturing

Vertical Analysis:

After completing a vertical analysis on the 2013 financial statements for Abc company, Inc., I believe three particular figures stand out. The first one is their cash and cash equivalents which came out to 30% of their total assets. Having 30% of their total assets being cash puts Abc company in a good position to expand and does not leave them cash poor. Next, their long term liabilities are only 11% of their total liabilities. This means that Abc company does not have an excessive amount of long term debt. The one number that stands out in a negative way is the percentage of operating expenses. Abc company’s total operating expenses increased from 2012 to 2013. In 2012 their operating expenses totaled 41% of their net revenue and in 2013 they were at 43%. This number is somewhat high and shows a pattern of increasing. After reviewing the vertical analysis of Abc company, Inc., I would conclude that they are a steadily growing company that would be a positive investment.

Horizontal Analysis:

The horizontal analysis of 2012 and 2013 also supports the statement that Abc company, Inc. would be a positive investment. This analysis shows that their interest expense decreased from 2012 to 2013. Their total assets and net revenue increased from 2012 to 2013 showing that Abc company is growing from year to year.

Liquidity Ratios:

The current ratio for 2013 is 2.87 and the acid test ratio is 1.97. These ratios are high compared to their competitor Dooney & Bourke. Because their ratios are higher, Abc company is not carrying as much inventory as their competitor.

Asset Management Ratio:

The average turnover rate is higher than that of their competitor meaning that Abc company Inc gets their products out at a faster rate.

Solvency Ratios:

The debt ratio has decreased from 35.8% in 2012 to 31.8% in 2013. This decrease means that Abc company’s total debt has become less compared to their total assets. Because of the decrease in the ratio, Abc company is more likely to receive help from creditors.

The times interest earned ratio is also higher than that of competitors which means that their income to interest is higher. They have more income compared to their interest expense.

Profitability Ratios:

Abc company has higher ratios for gross profit percent, return on net sales and EPS compared to their competitor. This means that they are more profitable than Dooney & Bourke.

Market Analysis:

By looking at the market analysis, Abc company is doing better than their competitor. Their stock value is higher and they have a higher EPS.

Worth the Investment:

After doing a complete analysis of Abc company Inc. I would advise that they are a profitable company worth investing in. Over the past two years they have increased in profitability and size. For the majority of their ratios Abc company is doing better than their competitors.

References

Abc company, Inc. Competition.2014 . Retrieved May 25, 2014, from http://www.hoovers.com/company-information/cs/competition.Abc company_Inc.cef99ffe20454f74.html

Abc company.com. Company Profile. 2014 . Retrieved May 5, 2014, from http://www.abc company.com/online/handbags/genWCM-10551-10051-en-/Abc company_US/CompanyInformation/InvestorRelations/CompanyProfile

Dooney & Bourke. 2014. Retrieved May 30, 2014, from http://fashionbi.com/brands/dooney-bourke

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