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    Annual Stockholder Report

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    Abel Athletics is preparing to release its first Annual Stockholder Report since the company's recent initial public offering (IPO). The accounting department has already prepared and provided the financial statements and ratios (see below) for the most recent year. Now all the division managers are meeting to help create the written analysis portions for the annual report keeping in mind all the stakeholders who will be reading this information. ( i.e.,shareholders, regulators, investors, security analysts, credit rating agencies, etc.) Using what you know about Abel Athletics from the scenario above, the financial documents, and details from your previous tasks, create Abel Athletics' first Annual Stockholder Report for its' stakeholders. Provide as much detailed analysis as possible to your shareholders for each of the following areas, keeping in mind how the users of this information are likely to use it:

    Summarize the nature of the firm's business and its business strategy
    Assess the internal and external risk factors for the firm
    Provide an analysis of the financial condition for the firm
    Evaluate the firm's credit worthiness
    Discuss the competitive position of the firm
    Summarize the financial and accounting control procedures in place to ensure compliance with applicable regulatory agencies
    Click to download the Financial Statements and Ratios for Abel Athletics.

    Group Portion: Upload your final group paper to the small group files and name it Management's Discussion and Analysis.

    Individual Portion: Each student is to write their own draft of the written analysis to shareholders and submit it to the small group files area under your name and labeled 'draft'.

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    Points Possible: 250
    Date Due: Friday, Dec 26, 2008
    Objective: Use effective communication techniques.
    Use financial ratio analysis to assess the stability of an organization.
    Use team and problem-solving skills to collaborate on a project.

    Submitted Files: Submit Task
    Score: N/A
    Instructor Comments: No comments have been made

    Click to download the Financial Statements and Ratios for Abel Athletics.

    FIN310 Financial Management Principles
    Group Project

    Phase 2 Task 1: Ratio Anlaysis
    Key Financial Data for Abel Athletics

    Stock Price (as of 12/21/06) $6.25
    Free Cash Flow/Share $0.36
    Dividend/Share (DPS): Dividends/shares outstanding $0.24
    Book Value/Share: Shareholders Equity/Shares Outstanding $0.18

    Strident Marks, Inc.
    Income Statement
    For the year ending December 31, 2006

    Revenue
    Net Sales $8,994,000
    COGS (not including depreciation) $3,759,600
    Gross Profit $5,234,400

    Expenses
    SG&A $1,245,900
    Depreciation Expense $350,000
    Total Operating Expenses $1,595,900

    Income Before Interest & Taxes $3,638,500
    Interest Expense $250,000
    Income Before Taxes $3,388,500
    Income Tax Expense $1,016,550
    Net Income $2,371,950

    Shares Outstanding 10,000,000
    Earnings Per Share (EPS) $0.24

    Beginning RE $1,500,000
    Dividends $2,400,000
    Ending RE $1,471,950

    Strident Marks, Inc.
    Balance Sheet
    As of December 31, 2006

    ASSETS

    Cash $1,336,950
    Accounts Receivable $900,000
    Inventories $7,500,000
    Total Current Assets $9,736,950

    Property, Plant & Equipment $625,000
    less Accumulated Depreciation $111,000
    Net Property, Plant, and Equipment $514,000

    Total Assets $10,250,950

    LIABILITIES & SHAREHOLDER'S EQUITY

    Accounts Payable $420,000
    Accrued Liabilities $484,000
    Interest Payable $2,500,000
    Income Taxes Payable $900,000
    Dividends Payable $2,400,000
    Total Current Liabilities $6,704,000

    Long-term debt $1,750,000
    Total Liabilities $8,454,000

    Common Stock at Par $425,000
    Retained Earnings $1,471,950
    Treasury Stock - at cost ($100,000)
    Total Shareholders equity $1,796,950

    Total Liabilities and shareholders equity $10,250,950

    Key Ratios:

    * Liquidity Ratios Industry Avg

    Current Ratio: Curent Assets/Current Liabilities 1.45 1.25
    Quick Ratio: (Current Assets-Inventory)/Current Liabilities 0.33 0.22
    Net Working Capital Ratio: Net Working Capital/Total Assets 29.6% 25.2%

    * Profitability Ratios
    Return on Assets: Earnings/Total Assets 23.1% 21.50%
    Return on Equity: Earnings/Equity 132.0% 125%
    Net Profit Margin: Earnings/Sales 26.4% 25%
    Operating Profit Margin: Operating Profits/Sales 40.5% 35%
    Gross Profit Margin: Sales-COGS/Sales 58.2% 55%

    * Activity Analysis Ratios

    Asset Turnover Ratio: Sales/Total Assets 0.88 0.95
    Fixed Asset Turnover Ratio: Sales/Net Fixed Assets 17.50 15.5
    Equity Ratio (Proprietary Ratio): Shareholders Equity/Total Assets 0.18 0.15
    Average Collection Period: AR/(Annual Sales/365) 36.52 40
    Average Payment Period: AP/((70%*COGS/365)) 58.25 25
    Accounts Receivable Turnover Ratio: 365/Avg Collection Period 9.99 8.8
    Inventory Turnover Ratio: COGS/Inventory 0.50 0.4
    Average Age of Inventory 728.14 675.2

    * Capital Structure and Debt Ratios

    Debt Ratio: Total Liabilities/Total Assets 82.5% 50%
    Debt to Equity Ratio: Long Term Debt/Equity 97.4% 50%
    Interest Coverage Ratio: EBIT/Interest 14.55 25.5

    * Capital Market Ratios

    Price / Earnings Ratio: Stock price/EPS 26.3 28.2
    Market to Book Ratio: Stock Price/Book Value per Share 34.78 37.5
    Dividend Yield: DPS/Stock Price 3.84% 2.50%
    Dividend Payout Ratio: DPS/EPS 101.2% 25%

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    Solution Preview

    DIRECTORS REPORT

    Your Directors are pleased to present the Annual Report on the business and operations of your Company and the audited accounts of the Company for the year ended 31st December, 2006.

    FINANCIAL RESULTS

    2006
    Net Sales $8,994,000
    COGS (not including depreciation) $3,759,600
    Gross Profit $5,234,400

    Expenses
    SG&A $1,245,900
    Depreciation Expense $350,000
    Total Operating Expenses $1,595,900

    Income Before Interest & Taxes $3,638,500
    Interest Expense $250,000
    Income Before Taxes $3,388,500
    Income Tax Expense $1,016,550
    Net Income $2,371,950

    NATURE OF THE BUSINESS AND THE BUSINESS STRATEGY.

    The Company is mainly engaged in the manufacture of equipments necessary for the athletics. The Company has made demand analysis for the equipments not only our country but also in various countries especially in Europe and the Central Asian countries. Presently, the company could export amounting to 10% of the total sales .However, on the basis of the demand analysis carried out by our marketing management team, the export can be increased by 50% from the present level. To ensure this, the company needs to expand its manufacturing capacity and the company has decided to retain earnings and is planning to come out with a new issue. If this strategy can be implemented, the shareholders of the company could get huge dividends in the forthcoming years.

    FINANCIAL PERFORMANCE OF THE COMPANY
    `

    The key objective for the year was to achieve impressive sales while maintaining costs at lowest possible levels. Your Company is pleased to report sales of 8,994,000 and PAT 2,371,950 for 2006 . We strive to achieve growth across all regions and major brands of the products of the company. We strive to increase the sale in future by aggressive advertisement and various sales and marketing initiatives. Your Company has taken several initiatives to reduce operating costs in the business. Your Company will strive to operate with minimum trade pipelines, selling as per the market demands, and maintaining a very efficient supply chain.

    DIVIDENDS

    The company has decided to declare the dividend amounting to2,400,000 for the current financial year since the company has earned net profit from its operations.

    RESERVES
    The total Reserves as on 31st December, 2006 stood at 1,471,950 for the purpose of future expansion and diversification of the company.

    EXPORTS

    During the year, the Company's export earnings amounting covering exports to Bangladesh,
    India, Australia and other markets representing at least 10% of the total sales.

    RESEARCH AND DEVELOPMENT
    Research & Development function has been undertaken by the company for the excellent performance of your Company in future.

    ISO CERTIFICATION

    We are under the process of getting ISO certification for the products manufactured by the company in order to boost the sales for the company's product.

    Health and Safety Standards

    Your company has been following the Health and safety Rules framed by the Government in its manufacturing facility and in all the working places.

    INFORMATION TECHNOLOGY
    Your Company has implemented two ERP
    packages. During the year, the company has implemented the web based Treasury operation integrating its Payments to vendors and Collections from customers centrally. Connected to all its business locations all over the country via satellite and terrestrial links, the Company is leveraging direct market information through its
    Wholesaler Automated project.

    CONSERVATION OF ENERGY, TECHNOLOGY
    ABSORPTION AND FOREIGN EXCHANGE EARNINGS
    AND OUTGO
    A separate statement for the Conservation of energy, Technology absorption and foreign exchange earnings and outgo has been attached herewith.

    Directors:

    Mr.X and Mr.Y who are the retiring directors in this ...

    Solution Summary

    The answer contains detailed format of the contents of the annual report.

    $2.19

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