CIRCUIT CITY

Circuit City

Circuit City

Introduction

I have been employed recently by Circuit City to produce a report detailing how they should proceed regarding their financial situation. This report outlines the research and findings with an interpretation of the results and comparisons. It also outlines facts and conclusions made regarding Circuit City and gives recommendations on how the company should proceed (Schwarzkopf, 2007).

Circuit City: Company Overview

Circuit City Stores is one of the leading specialty retailers of consumer electronics, home office products, entertainment software, and related services. The company primarily operates in the US and Canada. The company is headquartered in Richmond, Virginia and employs about 45,885 people. The company recorded revenues of $11,743.7 million in the financial year (FY) ended February 2008, a decrease of 5.5% over 2007 (Pizzey, 2006). The decline in revenues was mainly due to decreased store traffic at the comparable stores in the US. The operating loss of the company was $370.6 million in the FY2008, compared to an operating loss of $5 million in 2007. The net loss was $319.9 million in FY2008, compared to net loss of $8 million in 2007 (Higgins, 2007).

Issues Covered

The report looks at the impact of recession, debts of the company and the assets and liabilities in detail. It assesses the inherent strengths and weaknesses of the company and outlines areas for improvement.

Problems

Initially the main problem is debt due to ongoing recession that has hit the global economy. This poses a problem for Circuit City, as they will have difficulty fulfilling orders and trading without the overdraft. Circuit City also started trading in a period of recession but the economy has started to improve and slowly opening to allow exporting.

Plan of Action

A plan of action is now outlined of how Circuit City Electric Company management will carry out the gathering of research for the report.

Cash Flow Forecast

The first task for I is to construct a cash flow forecast to show the cash inflows and outflows within the business. The cash flow also shows the changes in the level of cash between periods in time, it also tells where cash has been generated from and how it has been used by the business (Davies, 2008).

SWOT Analysis

After the construction of a cash flow forecast a SWOT analysis of the company will be taken. SWOT standing for Strengths, Weaknesses, Opportunities and Threats, lists the features relevant to the company (Schwarzkopf, 2007). It considers internal factors such as the strengths and weaknesses of a company and external factors such as possible opportunities and threats from outside entities.

Ratio Analysis

The financial statements produced by the company will be analysed, the statements will be critically evaluated in relation to Profitability, Efficiency, Liquidity and Investment ratios. Ratio analysis provides a subjective view of the companies parts and an objective aid to decision making. The profitability ratios show the success of the company in relation to its profit maximisation and general performance of the company (Pizzey, 2006).

Discussion

The discussion interprets and analyses the results, makes any comparisons and draws together facts, events ...