Financial Analysis:Samsonite
Income Statement Analysis
Sales have been increasing, which may be the result of increased consumer spending, or looser credit policies. The latter is proven with an increase in accounts receivables. The large sales volume (and SIC code absence) indicates that the company is the primary competitor in its industry. However, even though sales have been increasing, the operating income has decreased from 2004 to 2005. This is due to the increase of total operating expenses. Specifically, the Selling/ G&A Expenses increased in 2005 and may indicate increased advertising expenses, increased sales commissions, new sales personnel, increased travel costs for sales people/ executives and/or increased payroll expenses.
The income before tax is still positive, however, the high income tax expense (due to higher earnings) and the high interest expense (due to high debt levels) bring the total net income down to $-9M. The net loss to common stockholders is even a bigger negative with $-23M, but it has been improving.
By looking at the income statement, Samsonite is in an ok place in terms of revenue. However, the increasing expenses are killing the company.
Balance Sheet Analysis
Samsonite has negative Retained Earnings, which shows that its liabilities are greater than its assets. Also, the retained earnings have decreased over the past 3 years, indicating that the company decreased in value. Samsonite’s accounts receivables have been increasing since 2003 and even made a 30% jump in 2005. This indicates looser credit policies, which may be one of the reasons for its increasing sales.
When dividing accounts payable by the inventory, we find that everything is owned by creditors. This puts the c ...