Financial Management - Annual Report Analysis.

Assignment 1 Annual Report Analysis

JWI 530 Financial Management 1 

Executive Memo: 

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? 

4. Liquidity 

· 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? 

Explain.