TASK 5

Custom Snowboards Inc



Table of Contents

Introduction2

Task A: Presentation for the CFO Regarding Bank Loan and Risk Mitigation3

Key Financial Points3

Credit History3

Financial Leverage4

Risk Mitigation5

Ratio Analysis7

Profitability8

Gross Profit Rate8

Return on Asset8

Interest Payments9

Task B: Recommendations on the Expansion of Custom Snowboards Inc. for the CEO10

Historical Analysis of Past Performance10

Vertical Analysis Income Statement10

Vertical Analysis Balance Sheet11

Indication of Historical Analysis to Future performance12

Improving Current Operations through Better Cost Controls13

Long-term Planning13

Lowering Manufacturing Cost14

Reducing Asset-drain of Work-in-Progress and Finished Goods Inventory14

Operating and Administrative Expenses15

Evaluation and Selection of Expansion Option15

Considering a Merger15

Considering an Acquisition16

Internal and External Risks and Mitigation17

Potential Return19

The New Operations in Europe20

Recommendation to the CEO21

References23

Appendix24

Custom Snowboards Inc

Introduction

The paper presents an analysis of the various financial aspects of evaluating an organization. The company under analysis is Snowboards Inc. and the paper is divided into two major tasks. The first task attempts to present a report to the CFO detailing the key points of company's financial performance impacting bank officer's decision, risk analysis and ratio analysis. The second part presents comprehensive and detailed recommendation for expansion covering various aspects of the company including historical analysis, future performance, recommending strategies for mitigating possible risks of expansion, and a summary of the expansion options.

Task A: Presentation for the CFO Regarding Bank Loan and Risk Mitigation

When banks loan money, they must be conscious of the risk involved in lending that money to certain borrowers. In an ideal world, all loans would be repaid in full and on time; however, in the real world there is always a risk that borrowers will be late in making their payments or will default on their payments entirely. Therefore, banks look at a number of factors before determining whether to lend money to certain investors. In the first part of this report, we will summarize the key financial points of Custom Snowboards Inc. that could impact the bank officer's decision.

Key Financial Points

Credit History

A bank pays attention to a potential borrower's liabilities before granting a loan application. It does so to evaluate how much money the prospective debtor currently owes and who the existing creditors are. By gauging liability trends, the bank makes sure it does not increase its own exposure to a single customer, a situation that banking specialists call being over-extended. For example, if a bank already has significant outstanding loans with a customer, extending more credit may result in over-extending.

One of the most important factors a bank will consider is the credit history of the potential borrower. If the potential borrower has a history of making late payments on loans or has defaulted on debt in the past, the bank is likely to see this person as a very risky borrower. In case of Custom Snowboards Inc., we put a vigilant eye on the credit history of the company (Gitman, 2003).

Table below shows the liability portion of the company. Total liabilities of the company are declining consistently, which mean the company is regularly paying its debts. The major portion of the liabilities contains mortgage payable and other long-term liabilities, and these liabilities are being ...