Financial Analysis of Custom Snowboards Inc Term Paper

Financial Analysis of Custom Snowboards Inc - Term Paper Example As we are aware that there has been an immense amount of economic turmoil all around the world. Custom Snowboards Inc. was also severely impacted as the customers decreased their expenditure on leisure and sports. However, the company did not have to suffer like other companies did and it suffered from a 4% decline in Sales. Horizontal Analysis An increase in Sales Expenses are fairly consistent Interest income increased by 28% and interest expense decreased by 5% Current assets increased by more than 100% and total assets by 3.6% whereas total current liabilities had no significant impact Retained Earnings increased by more than 70% Vertical Analysis Gross Profit is 30% of Sales General and admin expenses are less than 20% of sales on average during years 12, 13, & 14 On average, current assets constitute approx. 50% of the total assets Cash comprises of more than 15% of the total assets and has the highest constituency whereas receivable come second Current Liabilities are under 10 % of the Total liabilities and equity Trend analysis - Trend analysis is the percentage changes in items of the financial statement during successive years. We can also call it an extension of the Horizontal Analysis and indicates the direction of change. The snapshot shows the sales trend during years 12, 13, & 14 respectively. ... dit risk Loaned out funds wont be no longer available for operational and other bank use Risk of incorrect assessment of interest rate (Fitzsimmons,n.d.) The bank also looks at several other things in a company's financial statements. It also looks at the Debt-ratio, Interest Coverage ratio, current income status of the company as well as its credit history and overall stability of the Enterprise. Custom Snowboards Inc. Debt-ratio is currently 49%, which is less than its competitor. Moreover, another red flag comes when we look at the Financial Statements, specifically the Income Statement and see that Net Income has suffered a sharp decline by 74% due to a sharp decline in Sales. As the bank is concerned with the stability, the declining sales and income statement pose a risk to the lender in terms of ability of Custom Snowboards to cover its debt. Risk Mitigation Credit Risk is the major risk that banks are concerned with, The financial statements of Custom Snowboards Inc. show sta bility and gradual growth The trend analysis shows that the sales would grow gradually making sure that the company would be able to meet its obligations Horizontal and vertical analysis show that the company is not under huge current and long term liabilities and the expenses are not very high Custom Snowboards Inc. is a growing concern As far as the debt-ratio is concerned, a positive aspect is that although it is higher than the competitor, it has declined from last year. The company's Income Statement does not show a very positive picture, however, it is mainly due to the massive economic recession. Moreover, if we look at the Balance Sheet, we that the Working Capital is positive and the company has enough financial strength to meet its short term obligations and remain operational.