bigger is not always better
Bigger Isn’t Always Better!
Andre Pires, with over 15 years experience in the automobile industry opened a automobile parts store, in mid-western region of United States. Business had picked up significantly well over the years and Andre had more than doubled the store size by the third year of operations. Andre’s knowledge of finance and accounting was limited and he decided to recruit Juan Plexo, a second semester MBA student ,who had an undergraduate degree in Accountancy and was interested in concentrating in finance.
Andre had learned the nuances of the fiercely competitive auto mobile servicing business.
Andre had more than doubled the store size …show more content…
Q5. Besides comparison with the benchmark what other types of analyses could Juan perform to comprehensively analyze the firm’s condition? Perform the suggested analyses and comment on your findings.
Ans. The company can analyze the ratios of the organization. Using ratios, the relative profitability, growth or debt levels, can be measured with ease. A business ratio report, takes the hard work out of financial performance analysis. Different ratios signify different things. For example, a Current ratio of 1 is considered good. The type of industry in which the operation is conducted also matters. It is necessary that one is aware of these standard ratios so as to see the position of your performance.
Juan can prepare Common size income statement and balance sheet in order to understand the financial position of the company. This would assist Juan in better understanding of the company.
Common size income statement
Cost of goods sold
admin & selling expenses
Total Operating expenses