In five pages this paper examines 3 fictitious retail food companies in an assessment of their investment attractiveness based upon their financial results. Three sources are cited in the bibliography.
Name of Research Paper File: CC6_KSmgmtFin.rtf
Unformatted Sample Text from the Research Paper:
dont lie, but liars figure" unfortunately has found new life with the scandal currently unfolding around Enron. Companies strive to post the highest profit margins possible and so be
as attractive to investors as possible, but astute investors need to consider other points revealed by reliable and accurate balance sheets. Profitability
At first glance, Company Zs gross profit margin of 40 - nearly twice that of the next-closest company - would appear to be
the most attractive of the three companies. Company Z also posts the highest net profit margin of the three, and it appears to be the most financially sound of
the companies listed. When looking only at net profit, Company Z indeed is the most attractive. When expanding the view to include
possible changes in external conditions and how likely the three companies are to sustain their current business results, however, Company Z becomes far less attractive. These points will be
discussed further below, but the table of reference indicates that Company Z employs few if any measures for planning for the future. The retail food industry typically operates in
a market sensitive to economic conditions, and businesses active within it need to have contingencies for the future. Each of these companies can
be expected to pay similar prices for the items constituting the broad category of overhead. Using this assumption, then Company Zs prices must be much higher than those of
its competitors. This is fine in times of economic prosperity, but customers likely will choose Company Zs competitors should the external economy place pressure on customers own budgets.