How can I conduct a complete financial statement analysis of Chesapeake Bay Sea Food Wholesalers? What are the strengths, weaknesses, outlook, and state of the firm?
Due to the limited information available for the company, a horizontal statement analysis will work best. This type of analysis will compare the same markers across all three years of the company.
The sales of the company are strong, growing on average around $2,500. The gross profit margin for the company is a steady 25%. In a competitive food wholesale market, this represents a solid position in the market. The strong sales market and the marketing costs back up the assumption with stable increases in the marketing budget. The remainder of the expenses are relatively stable between growth years 2008 and 2009.
The balance sheet shows a few trouble areas. One area of concern is the dramatic increase in inventory. For the 2008 growth year, there was an increase of $59 inventory, but a $443 increase in the following growth year. Another area of concern is the depreciation on fixed assets. The current numbers reflect over 40% depreciation. The 'Notes Payable' reflects a dramatic uptick in the growth year 2009 simply because there was no note prior. The result is a rise in total liability growth from $139 (2008) to $815 (2009).
On first impression, the company appears to be a substantial market share holder in distribution with solid earnings over the past two years. The gross profit margin is a strength for this company. However, the company is also holding a large amount of inventory which will have spoilage issues. The increase was presumably purchased with the new note. The inventory with an outstanding note are weaknesses. However, the company lost money 2007 and became profitable in 2008 and 2009.
The outlook for the company is tied closely to the state of the firm as it sits. Right now the company is profitable and may remain so with such a high gross profit margin. A lot will depend on if the company can turn over the high inventory and balance it in the future. The reliance on loans to bolster the company inventory is a concern moving forward. Currently, the company is at a critical juncture with an unproven ability to manage inventory control. The profit margin and sales indicate a strong market presence, so there is a possibility of reaching balance. In my opinion the company is in the "watch and see" category.
To find out about the current financial condition and performance of a company you would need to apply a complex analysis to its financial statements. Normally it's enough to analyze balance sheet and income statement. The analysis would include calculation and comparison of a set of financial ratios, such as activity ratios, profitability ratios, liquidity ratios and financial sustainability ratios. One certain ratio can't show a full picture on a company's performance, they all have to ba reviewed in complex.
Since this means a lot of routine work such as calculations, analysis, making conclusions etc., there are online services, such as Finstanon - https://www.finstanon.com, where you can input the financial statements data and get a detailed report on the company's financial condition and performance, with all the necessary calculations, graphs, diagrams and detailed conclusions on a firm analyzed. Hope that helps.