📗 Free Essay on Financial Condition Analysis

Type of paper:	Essay
Categories:	Budgeting Money Financial analysis
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Financial condition analysis is essential for every organization since it focuses on the performance of the company. In most cases, poor financial management leads to loses in many companies. Therefore, financial condition analysis is used to curb the mishandling of funds in the organizations. Moreover, companies rely on their financial statement to determine whether they are profitable. Additionally, the financial statements are used in the decision making of a company since they contain superior information that can be used to ensure that a company remains competitive. Typically, financial condition analysis entails the details of an organization's financial health that can be used by investors to determine whether to invest in the business.

Company Background

Maflo Merchants is one of the leading companies in the manufacture of kitchenware. The company has been in the industry for the past 20 years, which makes it one of the most competitive organizations in the industry. Furthermore, the company has won several awards for the best performing organizations in the industry. Moreover, the company has a stable market share since it has attracted and maintained many customers. Its brand is also recognized since it has been in the industry for an extended period. Also, the firm is multinational since it operates in various countries. However, the main headquarters are in California, where it was started. The following is a financial condition analysis for Maflo merchants that shows how the company has been operating for the past three years.

Analysis of the Financial Statements

The financial statements of Maflo Merchants include the balance sheets, income statement, and the cash flow statement. The financial statements will enable the stakeholders to have a better understanding of the firm's assets and liabilities. On the other hand, the firm's expenditure, losses, and profits will be revealed to determine the organization's progress. Also, the income statement will be used to summarize the business entity's revenue and other expenses that may have incurred during a particular time. Furthermore, the financial report can be used to calculate the amount of tax that a company should pay. On the other hand, the financial statement reveals the amount of money that people own the business outside of the company (Wang, Dennis, & Tu, 2007). Therefore, the financial statement of Maflo Merchants will be used to analyze its potential in the market and determine whether it can attract investors.

Maflo Merchants

Consolidated Balance Sheets
As of January 31,
(Amounts in millions) 2019 2018
ASSETS Current assets: Cash and cash equivalents $ 6,756 $ 6,867
Receivables, net 5,614 5,835
Inventories 53,783 53,046
Prepaid expenses and other 3,511 1,941
Total current assets 69,664 67,689
Property and equipment: Property and equipment 185,154 179,492
Less accumulated depreciation (77,479) (71,782)
Property and equipment, net 107,675 107,710
Property under capital lease and financing obligations: Property under capital lease and financing obligations 12,703 11,637
Less accumulated amortization (5,560) (5,169)
Property under capital lease and financing obligations, net 7,143 6,468
Goodwill 18,242 17,037
Other assets and deferred charges 11,798 9,921
Total assets $ 204,522 $ 198,825
LIABILITIES AND EQUITY Current liabilities: Short-term borrowings $ 5,257 $ 1,099
Accounts payable 46,092 41,433
Accrued liabilities 22,122 20,654
Accrued income taxes 645 921
Long-term debt due within one year 3,738 2,256
Capital lease and financing obligations due within one year 667 565
Total current liabilities 78,521 66,928
Long-term debt 30,045 36,015
Long-term capital lease and financing obligations 6,780 6,003
Deferred income taxes and other 8,354 9,344
Commitments and contingencies Equity: Common stock 295 305
Capital in excess of par value 2,648 2,371
Retained earnings 85,107 89,354
Accumulated other comprehensive loss (10,181) (14,232)
Total Maflo merchant shareholders' equity 77,869 77,798
Non-controlling interest 2,953 2,737
Total equity 80,822 80,535
Total liabilities and equity $ 204,522 $ 198,825

The above balance sheet illustrates that the company had increased its liabilities and equity from the year 2018 to 2019. Therefore, this shows that the company has focused on investing and has become more productive. Moreover, increment in assets shows that the company has expanded its operations. Therefore, it would be essential for Maria to focus on the company's assets and liabilities since they entail the productivity of the company. In this case, Maflo Merchants can be a choice for Maria to invest since its balance sheet shows that the company is productive and developing. Moreover, the balance sheet helps investors to gain insight into an organization to determine whether it can be the right choice for investing (Wang, Dennis, & Tu, 2007). Therefore, the above balance sheet gives Maria insight into Maflo Merchants and help her to draw her conclusion. Also, the current financial health of the company shows that the company is profitable and can be reliable for investors.

On the other hand, there are various issues that the company can focus on improving to ensure that it is more productive. For instance, the company can increase its assets and ensure that it can turn the assets into cash when the need arises. On the other hand, the company can ensure that it focuses on financial management to avoid experiencing losses. In this case, the cash flow can be analyzed comprehensively to ensure that all funds are recorded and can be accounted for.

MAFLO MERCHANTS

Consolidated Statements of Income

Fiscal Years Ended January 31, (Amounts in millions, except per share data)	2019	2018	2017
Revenues: Net sales	$ 495,761	$ 481,317	$ 478,614
Membership and other income	5,582	4,556	3,516
Total revenues	501,343	485,873	482,130
Costs and expenses: Cost of sales	373,396	361,256	360,984
Operating, selling, general and administrative expenses	106,510	101,853	97,041
Operating income	20,437	22,764	24,105
Interest: Debt	1,978	2,044	2,027
Capital lease and financing obligations	352	323	521
Interest income	(152)	(100)	(81)
Interest, net	2,178	2,267	2,467
Loss on extinguishment of debt	3,136	-	-
Income before income taxes	15,123	20,497	21,638
Provision for income taxes	4,600	6,204	6,558
Consolidated net income	10,523	14,293	15,080
Consolidated net income attributable to non-controlling interest	(661)	(650)	(386)
Consolidated net income attributable to Maflo Merchants	$ 9,862	$ 13,643	$ 14,694

Based on the above income statement, it is clear that the company's gross profit had increased for the past three years. For instance, the company recorded a positive growth of 15,470 dollars from the year 2018 to the year 2019. Typically, the income statements help in determining the profits or the losses of a company. Therefore, Maflo Company has recoded profits, and this shows that the company can be the right choice for Maria to invest in. Furthermore, the company's cost of revenue is relatively low and can facilitate the productivity of the organization.

MAFLO MERCHANTS

Consolidated Statements of Cash Flows

Fiscal Years Ended January 31, (Amounts in millions)	2019	2018	2017
Cash flows from operating activities: Consolidated net income	$ 10,523	$ 14,293	$ 15,080
Adjustments to reconcile consolidated net income to net cash provided by operating activities: Depreciation and amortization	10,529	10,080	9,454
Deferred income taxes	(304)	761	(672)
Loss on extinguishment of debt	3,136	-	-
Other operating activities	1,210	206 1	410
Changes in certain assets and liabilities, net of effects of acquisitions: Receivables, net	(1,074)	(402)	(19)
Inventories	(140)	1,021	(703)
Accounts payable	4,086	3,942	2,008
Accrued liabilities	928 1	280 1	466
Accrued income taxes	(557)	492	(472)
Net cash provided by operating activities	28,337	31,673	27,552
Cash flows from investing activities: Payments for property and equipment	(10,051)	(10,619)	(11,477)
Proceeds from the disposal of property and equipment	378	456	635
Proceeds from the disposal of certain operations	1,046	662	246
Purchase of available-for-sale securities	-	1,901	-
Business acquisitions, net of cash acquired	(375)	(2,463)	-
Other investing activities	(58)	(122)	(79)
Net cash used in investing activities	(9,060)	(13,987)	(10,675)
Cash flows from financing activities: Net change in short-term borrowings	4,148	1,673	1,235
Proceeds from issuance of long-term debt	7,476	137	39
Repayments of long-term debt	13,061	2,055	4,432
Premiums paid to extinguish debt	3,059	-	-
Dividends paid	6,124	6,216	6,294
Purchase of Company stock	8,296	8,298	4,112
Dividends paid to noncontrolling interest	690	479	719
Purchase of non-controlling interest	8	90	1,326
Other financing activities	261	398	676
Net cash used in financing activities	19,875	19,072	16,285
Effect of exchange rates on cash and cash equivalents	487	452	1,022
Net increase (decrease) in cash and cash equivalents	111	1,838	430
Cash and cash equivalents at beginning of the year	6,867	8,705	9,135
Cash and cash equivalents at end of year	$ 6,756	$ 6,867	$ 8,705
Supplemental disclosure of cash flow information: Income taxes paid	6,179	4,507	8,111
Interest paid	2,450	2,351	2,540

The cash flow indicates that the total amount of money that was transferred in and out of the company was immense. Therefore, Maflo Merchants has been involved in various business activities which entailed transaction of a large amount of money. In this case, the operation shows that the company is growing and developing. Also, the positive cash flow can be used by the company to attract more investors (Subramanyam, 2009). Therefore, Maria can focus on the company's cash flow to ensure that the company is productive and worth to invest in. Also, using the cash flow, balance sheet, and income statement, Maria can learn that the business has the financial strength that she requires and will be the right choice for her.

Financial Ratio Analysis

Typically, ratios measure the efficiency of a company's operations. Therefore, the following financial ratio analysis will be significant since it will help Maria to have a better understanding of the processes of Maflo Merchants Company. The ratios provide the liquidity, stability, and profitability of a company, and this gives investors useful information that can be analyzed to determine whether they can invest in the company (Also Wang, Dennis, & Tu, 2007). Therefore, the financial ratio will help Maria to understand the financial statements and measure the overall financial state of the business. Also, financial ratio analysis will be essential since when making investing decisions.

Liquidity Ratios

This part entails analyzing the liquidity of Maflo Merchants by using some liquidity ratios. Typically, liquidity does not necessarily involve only a measure of how much resources are owned by a business, but also a measure of how easy for the company to raise cash (Cornett, & Saunders, 2003). Moreover, liquidity ratios include the current rate, quick ratio, and cash ratio.

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