Premium Essay

Financial Analysis of Starfire

In: Business and Management

Submitted By sharonmei
Words 1855
Pages 8
Financial Analysis
The operating cost is one of the most important issues that Starfire needs to concern about. In the case, FHP proposes to add two dry-van loads in order to enhance its working efficiency. We consider such loads as special sales order and take into account relevant information and cost behaviors. Different decisions and conditions may contribute to various financial consequences. Here, we simplify the complicated situations by analyzing three independent scenarios mentioned in the case. 1. Current financial situation
In order to analyze Starfire’s current situation more accurately, we seek to find a benchmark here to make a comparison. Industry average in America is hard to search and deal with, thus we decide to use JBHunt Corporation, which is served as a sample in this case and has similar operating structure (both use employees) as Starfire.
In the first step, we use common-size income statement to report their percentages respectively. The reason why we don’t use dollar value is that JBHunt is a public corporation and in a much larger scale than Starfire, so we only use its percentage as a reference. Following statistics are from JBHunt 2012 annual report. | Starfire | JBHunt | Revenues | 100.0% | 100.0% | Variable expenses | 59.5% | 0.0% | Contribution margin | 40.5% | 0.0% | Fixed expenses | 26.5% | 0.0% | Total operating expenses | 86.0% | 89.5% | Operating income | 14.0% | 10.5% |

From the comparison above, we can conclude that Starfire is able to get more operating income relative to its revenues. However, that’s only a little perspective of its financial situation. To make more accurate analysis, we should still consider other ratios.
In the second step, in order to measure its profitability, we take Dupont Analysis as a refrence and make detailed analysis step by step. Since taxes are ignored in this case, thus...

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