Avon Company Financials Statement Analysis Harvard Case Solution & Analysis

Avon Company Financials Statement Analysis Case Solution

Avon Company is working as a cosmetic company which is stock listed company, worldwide. In this industry, the leading company is the L’Oreal and P&G who are giving serious competition to the company.

Avon has inquired to make the company’s ratio analysis on the company’s current financial statement.

The Analysis of the financial statement has some benchmark criteria to follow. In this regard, the list of principles contains the extensively five criteria which are as follows:

  • review historical income statements and balance sheets
  • Compare past accounts over time to time basis
  • Calculate changes that occur in individual categories from year to year
  • Determine the difference as a percentage
  • Identify the conclusion of the above evaluations.

The full information is provided in the section below which has the information of the review of the historical income statements and balance sheets.

Avon Income Statement shows that it is working at a satisfactory level. The annual revenue of the company is $10,717 in the year 2012, and the last income was $5,718, which seems to be going down year by year. The falling of revenue will generate low level of operating income as seen by the figure of $219 million in the year of 2012 compared to $31 million in the year 2016. The company performing is going down day by day.

The company is facing problem in achieving its business's goals,sufficiently. Company’s assets Seems to be going down from the total assets of $7,382 million in the year of 2012, but now the company is lying on the total assets of Value of $3,419 million in the year of 2016 which is a roughly equal to half of its earnings in 2012.

The financials Statement of the company is more appropriately judged by the ratios of the enterprise. The ratios have four class which are as follow:

  • Liquidity Ratios:
  • Profitability Ratios
  • Activity Ratios
  • Leverage Ratios

Liquidity Ratios:

The liquidity ratio is allowed to consider the company’s current operations. The current event shave components which are the total current assets, total current liabilities which will lead the four ratios that are as follows:

Firstly, the current rate shows that it was 1.45 of current assets to 1 current liability in the year of 2012. And now it is 1.34 current assets to 1 ratio of the current liability. This lead of the current property that shows that company is more over its current liabilities.

The Quick Ratio of the company is 1.03 in the year 2012, but now the company's growth is declining which can be seen by the figure of 0.95 in the year of 2016. The Quick Ratios deals with the calculation of the current assets less the company inventories over its current liabilities. This medium shows that company is facing the problem of that they have more liabilities under the currents assets which have the value of the stock. The company's confronting negative level of their quick ratio.

The inventory to net working capital ratio comprises of that list which of its currents assets less vulnerabilities. The company has the ratio of 0.93 of stock over its net working capital in the year of 2012 and 1.16 in the year of 2016. It shows that the inventory is over the company’s working operation. Which is not a convenient position for the company

Cash ratio of the company is 0.45 over its working capital ratio in the year of 2012 and shows that the business has the cash of 0.44 in the 2016 year.

Profitability Ratios:

The Profitability Ratios have five levels of comparison which are as follows:

The Net Profit margin of the company shows that the Company was suffering from a negative profit margin of -0.39% in the year of 2012,which has further decreased, resulting in a loss of -1.89%.

The Gross Profit margin of the company was showing the figure of 61.10% in the year of 2012, and now it is 60.53% in the year of 2016.

The Return on Investment provides the information of company’s income over its total assets. In this manner, the company had a negative percent of -0.57% in the year of 2012 and it is increasing in a negative manner at -3.16%.

The Return on equity concerned the information of that company’s income over its total capital. In this manner, the company had a negative percentage of -3.45% in the year of 2012 and now increases in a negative way at -12.74% in the year of 2016.

Avon Company Financials Statement Analysis Harvard Case Solution & Analysis

 

 

The Earning per Share shows the information of that company’s income over its shares. In this method, the company had a negative percentage of -$0.22 in the year of 2012 and now increases in a negative manner at -$0.66 in the year of 2016. The figures show that the company has earned it income for its shareholders.............

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