Financial Report for Custom Snowboards Inc Essay

Financial Report for Custom Snowboards Inc - Essay Example At present the company is funded with $750 of debt to $903.8 of equity representing a debt to equity ratio of 0.83 or 83 cents of debt funding for every $1 of equity funding. Other considerations may consider the liquidity of the company, while many companies have a great business model and represent a good long term investment, many fail simply due to an inability to meet short term cash flow needs (Brealey et al 2006). At present, the liquidity position of Custom Snowboards Inc would appear to be healthy with a current ratio of 6.12 and an acid test of 3.91. The concern here on the behalf of the bank may be that Custom Snowboards Inc is not actually making best use of its current assets, rather than a concern over the liquidity of the company at this stage (Arnold, 2007). Further issues which the bank may consider is the long term prospects of the company, here the bank may choose to analyse both various measures of profitability as well as the underlying sales of the company which ultimately driver profitability. At present, the bank may highlight key concerns over both falling sales revenue and sharp falls in the operating and net profit margin. 2 In attempting to reduce perceived levels of risk, Custom Snowboard Inc may undertake a number of measures: Payback Debt – As has been noted, at present the company may be seen as having too high a level of liquid assets, indicating that the company is not using its assets in an efficient way. One way to reduce the perceived risk of the company would be to use such assets to reduce the amount of debt the company has. This would have a double effect on the company, on the one hand, the debt to equity ratio would reduce, making the company a less risky proposition for investors from a capital structure perspective. In addition, the liquidity ratios would be reduced to what the literature (Arnold, 2007) defines a more reasonable level. Overhead Reduction – One of the issues for Custom Snowboards Inc has been that while sales have fallen in recent years, fixed overheads have remanded the same thus resulting in a falling gross profit margin and presenting investors with a profitability risk. In seeking to address the problem, Custom Snowboards Inc should begin a program of overhead rationalisation. Here the company should seek to undertake a significant program of cost cutting with the aim of reducing overhead costs in line with the reduction in sales revenue seen. 3 In considering weather Custom Snowboards Inc is able to pay back the principal and loan it may be prudent to analyse a number of key ratios and tends. At present the company is paying an interest charge of $75,000 per year, if the company were to take on an additional $1m of debt at 6.75% this would add an additional cost of $67,500 PA to the company’s interest charges. Recent years have already seen key ratios declining with the net income ratio falling from 1.7% to 0.5%, and times interest earned reducing from 2 .91 to 1.53. It is believed that by increasing the amount of debt in Custom Snowboard Inc’s capital structure and thus adding greater costs of financing, these key ratios will be reduced further thus questioning whether the company can afford the additional interest charges and principal payments. In considering the net income ratio and times interest earned, it should already be noted that in year 14, Winter Sports outranked Custom Snowboard

Secondary Research Paper Essay Example | Topics and Well Written Essays - 1750 words

Secondary Research Paper - Essay Example And most of the time, service provide are seen taking the lead to offer exceptional plans which may include abundant amounts of air time and even less rates with regard to international roaming. Further, getting online too is being made easy through the cellular handset, which the fixed line telephone user can never dream of. With the internet turning out to be an important part of everyday life, mobile phones most of the time, while on travel or on holiday, help the customer log on to the World Wide Web without much hassle. Customer experiences have also given the thumbs on this, complaining that the fixed phone lines often turn out to be too noisy to allow a modem connection at any speed.   Ample research done on this suggests that the mobile telephones have overtaken fixed telephones in terms of subscribers. So is the case with traffic and revenue. Besides, fixed-line operators have begun having to face competition from new entrants in local, national and international long-distance telecommunications and Internet markets, as well as substitution from their mobile counterparts. In such an event of fixed line phones facing an era of being obsolete in the near future, it would be important to study what causes this phenomenon, and to look at what really ails the fixed-line telephone sector. The ever increasing spread of mobile phones and easy access to voice over internet protocol (VoIP) facilities have stood in the way of fixed line operators, ever since these technologies began to blossom. More subscriptions meant more revenue for service providers. As more customers began logging on to these new-age technologies, users diminished with regard to fixed line operators. More important was the cost involved. Long distance calls came for peanuts, as compared to the costs involved in making such calls over the fixed phone. Many a mobile phone company took the leap toward more revenues seeing the vast opportunity before them. More customers