Schmidt, Taxman & Wynn Dike- Case Study 2

Running head: Case Study 2 Three Company Analysis

Week 2 Case Study: Three Company Analysis

Angela Sikowski
Concordia University
Professor Victoria Karr
MBA 830
February 22nd, 2016

Schmidt, Taxman & Wynn Dike- Case Study 2

Abstract
In this second week case study, the author will assess Schmidt Sportswear, Taxman CPA
and Wynn Dike Manufacturing companies using the ratios from the reading and outside sources
to analyze their financial conditions. The author will accomplish this by analyzing the
information and ratios presented in each case. The author will assess the ratios presented, answer
the questions for assessment in the case study and provide an overall analysis on the financial
condition of each corporation.
Keywords: Ratios, Seasonality, Liquidity, Solvency and Profitability.

Schmidt, Taxman & Wynn Dike- Case Study 2

Are the Companies Doing Well?
The author will provide analysis for each company individually in response to the
questions posed in the case study. The author interprets whether or not companies are doing well
in terms of profitability or sales growth. According to the ratios presented for the Schmidt
Sportswear Company the company has grown by 25% in two out of the three years presented for
analysis. This is incredible growth in any industry. The profit margin is within one percent of
industry comparison and is to be expected in a growth company. Investments are more than
likely needed to generate such growth increase in sales force, investments in advertising and
promotions. The return on assets and equity for this company are also within one percent of the
industry standards and are greater than zero therefore the company is providing a return. The
asset turnover ratios are also higher than one revealing that sales are outpacing the assets.
According to the ratios presented for the Wynn Bike Manufacturing Company, the profit ratios
are not doing as well as Schmidt Sportswear. The profit margin, asset turnover ratios and return
ratios are all less than industry benchmarks. Therefore this company is not performing in
comparison to industry standards. The return ratios are fairly low; although it is positive that the
return on assets and return on equity ratios are almost equal indicating that this company may be
debt free and not leveraged. According to the ratios presented for the Taxman CPA, the profit
ratios are a mix of doing well and not meeting industry standards. While the profit margins for
the past 5 years have been over 30%, they fall short of the industry standard of 50 56%. The
return on equity is above industry benchmark which is positive news for investors. The return on
assets fluctuated between 7 and 9.5% over the five years present and were less than half the
industry standard. This could be due to investment in assets over the five year time frame.

Schmidt, Taxman & Wynn Dike- Case Study 2

What Types of Firms/Industries are these?
According to the ratios presented for the Schmidt Sportswear Company, the author
believes this firm is a retail business with a niche product (high growth) that is privately held.
According to the ratios presented for the Wynn Bike Manufacturing Company, the author
believes this firm is a manufacturer that is privately held and not particularly prepared for long
term performance. According to the ratios presented for the Taxman CPA, the author believes
this firm is a privately held financial services firm with aggressive collection of receivables.
Is Seasonality in Existence?
From what the author can determine from the ratio worksheets, there is seasonality to all
three businesses. The information was given in terms of years, but seasonality it typical in these
types of firms. The bike manufacturer will typically see an increase in bicycle production in the
summer when the majority of their customers are pushing inventory. The sportswear retail
company would also experience seasonality. For example, there would be an increase in demand
for ski wear in the winter months and a demand for running shoes or golfing goods in the spring
and summer. The tax financial services company would also experience seasonality around tax
time or end of the year.
Analysis of the Ratios
According to the ratios presented for the Schmidt Sportswear, the ratios that need to
improve are the profit margin, return on assets, receivables turnover, average collection and the
asset turnover. Profit margins have gone down over the past 3 years and are below industry
standards. The author could conclude that this company has a growth strategy and is investing in
sales forces or other cost associated with growth. The firm has solid ratios for the returns, the
receivables turnover and the total asset turnover. According to the information provided for the

Schmidt, Taxman & Wynn Dike- Case Study 2

Wynn Bike Manufacturing, the ratios in need of adjustment are the profitability ratios, the
turnover ratios and the debt/total assets ratio. The low profit margin does not leave a lot of cash
for this company to continue to invest in assets without incurring even more debt. The
Debt/Total Assets ratio is almost 65%; the lower the better for this ratio. This firm is also falling
below all of its industry benchmarks. The author would recommend this firm cut costs to
increase profit and freeze asset purchases. According to the information provided for the Taxman
CPA, the only ratio in need of improvement is the profit margin. The firm is experience less than
industry profit margins by 20%. The liquidity and other profitability ratios are all solid. Quick
and Current ratios are greater than one and in line with industry benchmarking and they have a
nice low Debt/Assets ratio.
Conclusion
In conclusion and after assessment of the ratios presented for three different companies, the
author presented analysis and opinion on their financial conditions.. The author supported her
opinion with ratio research of the company and review of the required reading.

Schmidt, Taxman & Wynn Dike- Case Study 2

References
Financial Ratio Lecture, Adapted by William Messier, Jr; Financial Ratios Retrieved
from: : http://www.slideshare.net/Ellena98/financial-ratio-lecture
Ratio Analysis You Tube Video.
Retrieved from: : http://www.youtube.com/watch?v=3lqYLpUenms