Presentation to CEOCustoms Snow Board

Historical analysisTrend analysis – Practice of information collection to spot

a pattern in order to predict future events. In present case, on basis of trend analysis there is an increase in net sales.

Liquidity ratio – Current and acid test ratioSolvency ratio – Debt ratioProfitability ratio – Gross profit margin, operating margin,

return no total asset, return on equity.Efficiency ratio – Inventory turnover, receivables turnover

ratio

Future performanceEuropean sales forecast – Rise in sales from year 15 to 19.Presence of cash in hand to meet the future short term

obligations.Strong overall equity position.Inefficiency of management to hamper with better returns

to investors.

Improvements Reduce advertising costs as well as overall general and

administration expenses.Bring improvements in overall cost of production. Use ABC costing approach.Advantages to ABC method of costing –To find cost incurred in every operational activity.More accuracy in costing top find operational flaws.Better understanding of overhead costs.

Internal and external risks InstabilityIneffective managementFinancial lossHigh interest rate risk due to fluctuationsAmount of credit riskIncreased competitionPolitical riskCultural Risk

Mitigation of risk Keeping good cash in hand.Limiting the amount raised through debts.Maintain an adequate cash flow. Recruitment of right personnel with the requisite skills. Take help of outsourcing firms to manage the increase

work load due to expansion. Training and developmental sessions for staff members.

Potential returns NPV

Accept a project if its NPV > 0

Reject a project if its NPV < 0

Indifferent where NPV = 0

NPV = 28437>0, better to investIRR

Accept a project if IRR > r p

Reject a project if IRR< r p

Indifferent if IRR = r p

IRR= 10.8%, better to invest

Expansion options1. Expansion - Procuring a building and equipment and

creating a new manufacturing facility. This increases cost of production.

2. Merger - EPS after merger is expected to be 1.18 and before merger it is 0.98. EPS has doubled which is profitable.

3. Acquisition – Custom Snowboards Inc. is considering this option at $2.40/share. In case if acquisition, offer price of the firm is less than present value.

Capital structure Best option is long term debt.EPS is maximum for long term debt i.e. 1.953. Other options shows less earning per share.

SummaryMerger is the best expansion option due to increase in

earning per share. Best capital structure is long term debt due to maximum

earning per share.

References Activity Based Costing. (2013). [Online]. Available through:

<http://www.valuebasedmanagement.net/methods_abc.html>. [Accessed on 8th February 2013].

Bragg, S. M. (2012). Financial Analysis: A Controller's Guide. John Wiley & Sons.

Zhang, M. (2008). A Theoretical and Empirical Study of Computing Earnings per Share. Pro Quest.

Baker, S. L. (2010). Perils of the Internal Rate of Return. [Online]. Available through: <http://www.sambaker.com/econ/invest/invest.html>. [Accessed on 13th February 2013].

EBIT-EPS Capital Structure Approach (2010). [Online]. Available through: <http://blogbschool.com/2010/10/27/ebit-eps-capital-structure-approach/>. [Accessed on 13th February 2013].