Assignment 1 Annual Report Analysis
JWI 530 Financial Management 1
1. Profitability/Net Income Margins
· What are the after-tax net income margins (i.e., net profit margins) for both companies?
Mohawk net margin in FY2019 is 7% and Dixie is -4%
How do they compare?
Mohawk net margin is significantly better because Dixie’s net margin is in the negative
· Who achieves the higher net income margin? Why? Mohawk achieves the higher net income margin based on the COGS $7,294.63, SG&A 19% sales and net profit 744, the cost structure items are higher compared with Dixie cost of sales 288, 22%
Tip: Analyze the major cost structure line items in the income statement (COGS, SG&A, interest, other, and taxes) as percentages of net sales, so you can identify reasons for better net income margins. Identify and comment on the differences. You may not know why a particular cost item like COGS is higher or lower, and that’s okay. Your CEO only wants to know which cost-structure items are higher or lower for each company.
2. Inventory Management
· Who does a better job managing their inventory (Inventory Days on Hand ratio)?
· What are their respective 3-year trends for Inventory DOH?
· What options could the company consider improving inventory management?
3. Cash Is King
· How much net cash from operations did each company generate last year?
· Which company has done a better job generating cash from operations?
· In layman’s terms, how is each company spending their cash with respect to reinvestments in
the business, changes in debt, and returning money to shareholders?
· How do the companies compare in terms of the current ratio, and what are their respective 3- year trends?
· Do their current ratios indicate that either of these companies could go bankrupt soon?