Date: April 1, 2017
Memo To: Owner Tom Scott and Tom Firsts
From: (Student's Name)
Subject: Facts behind the Operations at the Nantucket Nectars.
Following the change in sales figures, the issues to deal with the cost management initiatives, and the profitability of the company, I have come to the following findings:
First, having analyzed the different financial statements of the Nantucket Nectars' company, it is noted that there is a substantial amount of ramifications coming from the Initial Public Offer data from SDC. This poses a risk as to whether the company's financial statements truly and fairly reflect the correct amount of information availed to the public immediately after the IPO. For instance, for its balance sheet presentation, it can be noticed that the company continued to engage in enormous long-term debt obligations for the period between 1994 and 2002. The debts between these periods stood at 0 and $1.048 billion. The increase in the amount of debt could further destabilize the company's operations.
Second, the effect of the different types of financial statements that are reflected in the history of the Nantucket Nectars company are quite clear, thereby opening the way for a thorough audit of the specific role and effects of various operations carried out by the company. For instance, it is noted that the company mostly depends on short-term debt in order to conduct operations fully. The value of other debts has also increased significantly over the years and thus, it will be safe to conduct a thorough audit process in order to determine the possible flaws within the company.
Third, the income statement is also seen to be used for different kinds of accounting practices within the Nantucket Nectars company. The income statement gives a detailed financial position of the Nantucket Nectars company, indicating the various losses as well as any other financial gains or potential shown by the company. For instance, the statements indicate that there were losses in the first two years of operations before the company could now start making profits.
Fourth, the sales aftermath of the Nantucket Nectars indicates some pertinent issues that need to be addressed. The company employs an excess number of employees, over 100, of whom 15 are accounting officers, 20 employees are involved in the area of marketing, with the biggest number of company employee-population being the people involved in the sales department of the company. The sales people are around 57 in number and are the backbone of the Nantucket Nectars company and all its business activities and transactions. There are five sales administrators, in charge of the sales department of the Nantucket Nectars company. Consequently, there are around three personnel in charge of individuals who are part of the quality control sector. This large number of employees translates to huge expenses in terms of wages and salaries that significantly reduce the gross profits of the firm.
Having looked at the ratios of the company, it can be seen that both the gross profit margin and the EBITDA margins increase profoundly for the periods between 1997 and 2002. It is ascertained that the gross profit margins increase significantly and then remains constant at 38.2% for the period between 1998 and 2002. This is an indication of poor marketing strategies that translated to poor sales revenue.
In comparison to its peers within the same industry as Starbucks, Welder Nutrition, Robert Mondovi and Cott Corp, it can be seen that the company's EBITDA margin is way below those of its peers. This also goes for the gross profit margins where the company's peers have posted positive and tremendous results over the years. These significant variances in the industry might be attributed to peers conducting businesses at advanced stages having adopted effective pricing and marketing strategies like offering goods at discounts hence promoting their respective sales revenue base.
A ratio analysis of the Nantucket Nectars company is considered to be an essential and integral part since it provides deeper insight into the company's operations and business activities in comparison to other peers within the same industry.
Nantucket Nectars company uses three methodologies of valuation that include: the process of comparable trading, comparable acquisitions and also, the cash flow, which has undergone a lot of discounting. It should be noted that the adoption of all these processes might translate to confusion since they all provide different and distinctive results.
As for recommendations, first, the general situation and prevailing environment of the Nantucket Nectars company is quite telling and requires a whole load of attention. This is needed in order to improve on the overall sales of the Nantucket Nectars company, as well as to rise up the company's corporate value, profitability and cost management.
Furthermore, the company should also engage with various key stakeholders both internal and external, in order to ensure that the company passes over any tests and issues that may drag it behind. These stakeholders will also likely assist the company to conduct effective operations that might trigger consistent positive performance over the company's future dealings.
Also, the company should expand and develop their corporate strategy in order to help them in dealing with matters related to corporate governance and corporate affairs for that matter.
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