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Business Strategy in Releasing the Annual Stockholders 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:
1. Summarize the nature of the firm's business and its business strategy
2. Assess the internal and external risk factors for the firm
3. Provide an analysis of the financial condition for the firm
4. Evaluate the firm's credit worthiness
5. Discuss the competitive position of the firm
6. Summarize the financial and accounting control procedures in place to ensure compliance with applicable regulatory agencies
7. Instructor Comments:
8. Please use the Financial Statements and Ratios posted below.

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

Stock Price (as of 12/31/08) $34.75
Free Cash Flow/Share $2.00
Dividend/Share (DPS): Dividends/shares outstanding $1.35
Book Value/Share: Shareholders Equity/Shares Outstanding $1.00

Abel Athletics
Income Statement
For the year ending December 31, 2008

Revenue
Net Sales $50,000,000
COGS (not including depreciation) $20,900,600
Gross Profit $29,099,400

Expenses
SG&A $6,926,284
Depreciation Expense $1,945,742
Total Operating Expenses $8,872,026

Income Before Interest & Taxes $20,277,374
Interest Expense $1,389,815
Income Before Taxes $18,887,559
Income Tax Expense $5,651,268
Net Income $13,236,291

Shares Outstanding 10,143,301
Earnings Per Share (EPS) $1.30

Dividends $13,693,456

Abel Athletics
Balance Sheet
As of December 31, 2008

ASSETS

Cash $7,432,455
Accounts Receivable $5,003,336
Inventories $41,694,463
Total Current Assets $54,130,254

Property, Plant & Equipment $3,474,539
less Accumulated Depreciation $617,078
Net Property, Plant, and Equipment $2,857,461

Total Assets $56,987,715

LIABILITIES & SHAREHOLDER'S EQUITY

Accounts Payable $2,334,890
Accrued Liabilities $2,690,683
Interest Payable $13,898,154
Income Taxes Payable $5,003,336
Dividends Payable $13,342,228
Total Current Liabilities $37,269,291

Long-term debt $9,728,708
Total Liabilities $46,997,999

Total Shareholders equity $9,989,715

Total Liabilities and shareholders equity $56,987,714

Key Ratios:

* Liquidity Ratios Industry Avg

Current Ratio: Current 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 23.2% 21.5%
Return on Equity: Earnings/Equity 132.5% 125%
Net Profit Margin: Earnings/Sales 26.5% 25%
Operating Profit Margin: Operating Profits/Sales 40.6% 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 17.5 15.5
Equity Ratio (Proprietary Ratio): Shareholders Equity/Total Assets 0.18 0.15
Average Collection Period: AR/(Annual Sales/365) 37 40
Average Payment Period: AP/((70%*COGS/365)) 58.25 25
Accounts Receivable Turnover Ratio: 365/Avg Collection Period 10.0 8.8
Inventory Turnover Ratio: COGS/Inventory 0.5 0.4
Average Age of Inventory 365/Inventory Turnover 728.1 675.2

* Capital Structure and Debt Ratios

Debt Ratio: Total Liabilities/Total Assets 82.5% 50%
Debt to Equity Ratio: Long Term Debt/Equity 0.974 0.5
Interest Coverage Ratio: EBIT/Interest 14.59 25.5

* Capital Market Ratios

Price / Earnings Ratio: Stock price/EPS 26.6 28.2
Market to Book Ratio: Stock Price/Book Value per Share 34.75 37.5
Dividend Yield: DPS/Stock Price 3.88% 2.50%
Dividend Payout Ratio: DPS/EPS 103.5% 25%
Price/FCF 17.4 15.1

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Business strategies in releasing the annual stockholders reports.

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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'.

Suggested Topic Resources

From the left navigation bar, click Course Materials under Interactive Learning. This will allow you to view the supporting multimedia or text-based materials for this Phase.

Click on the link for tutorials on Microsoft Excel.

Click on the link for an article on Microsoft Excel.

To access the Microsoft Excel Learning Lab, click on the Learning Center on the top navigation bar. Then click on the Learning Labs in the left navigation. From there you can go to one of the following labs:

"Advanced Functions of Excel Lab"
"Basic Microsoft Office and Virtual Campus Lab"
"Center for Excellence in IT"
All of the labs have information on Excel in them.

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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