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Annual Stockholder Report

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%

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