Acc2101 group memo PDF

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GROUP ESSAY FINANCIAL ACCOUNTING...

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Heading To: From: Subject: Date:

Introduction · What did the fund manager ask you? · Why is a decision needed? · What key information is contained in this memorandum? (Overview) · What company would you recommend? Findings: · What did you find based on the questions asked? Recommendation · What are the risks and potential opposition that might result from the company you choose? · Which company would you recommend? And why? Conclusion · Summary of main points Format · Double Space · 12 Font

Memorandum To: Ronyhel Peguero, Fund Manager, Baruch College Fund, New York, NY. From: Financial Analysts at Baruch College Fund, New York, NY. Subject: Financial Analysis of American Eagle Outfitters, Inc. and The Buckle Company,Inc. Date: 11/11/2017. This memo presents financial analysis of two U.S. retail companies: American Eagle Outfitters, Inc. and The Buckle Company, Inc. Our team examined if the two companies present potential investment opportunities. We analyzed American Eagle and Buckle’s financial statements for years 2013-2015. Our analysis focused on the companies’ net sales trend, management of accounts receivables, allowance of uncollectible accounts, and total current receivables to total current assets ratio. Based on our findings, we recommend investing in The Buckle Company, Inc. Findings Financial Analysis of American Eagle demonstrated a decline in net sales in the past two years. In 2014 the company’s net sales decreased by 6% compared to the prior year. In 2015, the declining trend continued with a 9% reduction in net sales compared to year 2014. Accounts receivable were reported on the Consolidated Balance Sheet. In 2015, the amount of accounts receivable showed 8% reduction compared to year 2014. The amount of accounts receivable represents only 2% of net sales. Because American Eagle has a large amount of cash sales, we won’t be using net sales to calculate the receivables turnover ratio as it will overstate a company’s ability to efficiently manage receivables. Additionally, American Eagle did not report an allowance for uncollectible accounts in the balance sheet.

Financial Analysis of The Buckle Company, Inc. demonstrated continuing growth in net sales in the past three years. In 2014 the company’s net sales increased by 0.35% compared to prior year. In 2015, the sales grew by 2.2%. Accounts receivable were reported on the Consolidated Balance Sheet. In 2015, the amount of accounts receivable showed a growth by 98% compared to prior year. Because Buckle has a large amount of cash sales, we won’t be using net sales to calculate the receivables turnover ratio. Similar to American Eagle, Buckle does not report an allowance for uncollectible accounts in the balance sheet. American Eagle’s ratio of total current receivables to current assets is 7.62%. Buckle’s ratio of total current receivables to current assets is 2.64%. Neither company has a relative large portion of its current assets as receivable nor do they report allowances for uncollectible accounts. Therefore, there do not appear to be any problems with each company’s management of receivables. Recommendation While The Buckle Company, Inc. demonstrated excellent financial health and increase in net sales, we noticed a slight decline in net income, EPS, and important profitability ratios. These factors might signal future decline in prices per share. However, compared to its direct competitor, American Eagle, Buckle is a better investment option. Conclusion American Eagle has weaker financial standing than Buckle. American Eagle’s net sales declined while Buckle’s net sales showed slight growth. Cash sales were significantly higher than credit sales for both companies. Additionally, there were no indicators of any problems with each company’s management of receivables....