Custom Snowboards, Inc has seen exponential growth over the past few years and is seeking to expand their business into different areas throughout the world. The opportunity for growth is apparent when considering the company’s financial situation, profitability and liquidity. However, it is important for Custom Snowboards to understand the associated risks involved when considering obtaining a loan from the bank and expanding their business into a new market.
Summarize the key points of the company’s financial picture that could impact the bank officer’s decision.
The bank is going to want to see the whole picture of Custom Snowboard financial picture and there are many key points that will help enable CB get a loan. The key points in the balance sheet include CB’s short term investments, the changes to cash and cash equivalents, minimizing their long-term liabilities, increasing accounts payable, and increasing equity. When reviewing CB’s income statements the key points to be considered are increasing gross profits ,as they have been somewhat stagnate the past few years, increasing their operating expenses and decreasing their total operating income. I find these areas to be of most importance because they show the bank CB’s ability to increase profitability, give a snapshot of their liquidity and solvency, and the probability that the loan will be paid back on time.
The company’s gross profits were able to good growth from years 12-14 by $63,700 from years 12-13 and $39,200 from years 13-14. The primary reason for this growth was due to the increase in net sales from $4,536,000 to $4,771,200 form years 12-14. While cost of goods sold remand the same over the three years, net sales increase by 3.2% from years 12-13 and another 3% from years 13-14. This shows that while CB is increasing their profits and should be able to trend that way in the