finance assignment
Leila@
curry_shoes-updated_1.docxFinancial Analysis
Curry Shoes herein on referred to as the company “the company “was managed over the span of six years between years 11-16. During the said years the company performance showed some comprehensive gains in terms of its financial performance which was seen to translate into higher stock prices and improved creditworthiness.
The Board of Directors for the company over the period of evaluation included the following:
· Mariana Salazar
· Fahad bin Homaid
· Ana Ceja
Breakup of the financial performance of the company and how it changed over the span of six years is presented in the sections that follow.
Sales units and revenues:
Company sales over the past six years i.e. Year 11-16 saw a substantial growth. More specifically the company sales increased from almost 5000 units in year 10 to over 7000 units in year 15 a decline in sales was then observed in the year 16.
A more thorough analysis of the sales figures revealed that a major portion of company sales were wholesale sales which made up almost 85-90% of the total sales in any given year. Private label sales were observed to pick up in the year’s 14 and 15 whereas a decline was again observed in the year 16. The said decline was consistent with the overall sales decline as already discussed.
A particular area of concern was the company sales through the internet which despite the company’s best efforts did not show any substantial gains. A growth was observed in the said sales in each year under management i.e. years 11-16 however even with the growth the sales formed a much smaller portion of the overall company sales as compared to the management hopes.
Revenues
The overall trend in sales as discussed above was reflected in the net revenues. More specifically the company revenues saw a decline in net revenues in the years 11-13 based on low private label sales and almost stationary wholesale sales. IN the following two years the revenues were observed to increase substantially from above USD 300 million in the year 14 and above USD 350 million in the year 15. The said increases can be traced to increased internet and private label sales with smaller growths in whole sale sales.
Year 16 however saw revenues decline back to USD 350 million based on the decrease in all three of the company’s component sales i.e. wholesales, internet sales and private label sales.
Profitability
The company profitability was measured in terms of the Return on Equity and Earning per Share (ROE and EPS).
The ROE over the six years that the company was managed showed impressive performance beating the investors’ expectations in all but two years. More specifically the ROE improved from almost 14% in year 10 to almost 21% in year 16. The growth in ROE in management’s opinion was contributable to improved profitability as a result of better cost management and also as a result of increased revenues.
The performance in the years 12 and 13 was below par and failed to meet investors’ expectations. The main cause for the said decline in performance can be traced to the significant decline in company revenues which have already been discussed in earlier sections.
Performance in terms of the EPS again showed similar trends. More specifically overall the EPS was seen to show an upward trend a positive indicator. However the EPS for the company remained below investors’ expectations in the years 10-14. The said trend in EPS can be traced to less below par revenue growth in year 11 and declines in revenues and profits in the years 12 and 13.
Investor perception and competitiveness:
Company investor perception was measured in terms of the company stock prices, credit ratings and image ratings.
The company stock prices overall showed a trend similar to that of EPS i.e. there was a decline in years 12 and 13 whereas a growth was then observed in the following years. The said trend I believe can be traced to the fact that stocks prices were a reflection of how the company was performing and investors were willing to pay more for the company as its earnings increased.
In terms of credit ratings the company credit ratings remained consistently above investors’ expectations and improved from B+ in year 11 to A+ in year 14 a rating which was maintained by the company till year 16. The said ratings indicate that markets viewed company risk’s to be lower as compared to when the management took over.
Company’s image ratings were one area where the company I believe faced constant drawbacks. More specifically the company image rating exceeded investor’s expectations in the years 14 and 15 and failed to meet the expectations in all other years.
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