Relaxo Footwear has grown to sell over 100 million pairs of shoes annually, likely changing the lives of its long-term shareholders. The document divides analysis of the company into its business quality, management quality, and valuation. It asks students to analyze Relaxo's business quality by addressing questions about its stock and market cap performance, earnings retention, profitability, growth drivers, economies of scale, branding, future prospects, comparison to Bata, dividend policy, and sources of competitive advantage. Students are split into 10 groups, each addressing a subset of questions to take a collaborative approach to analysis.
This is one complete analysis of Financial Statements of Tata Motors. It includes Ratio analysis, Trend analysis, common size statement as well as comparative income statement and cash flow statement.
RMAT-rubber injection technology, its high compressed rate with ultra light weight will give runner more durable performance with spending less energy based on theory and market response. For whole bottom unite of sandal or even boot, its anti-slippery and cushioning, also rates fairly high.
This is one complete analysis of Financial Statements of Tata Motors. It includes Ratio analysis, Trend analysis, common size statement as well as comparative income statement and cash flow statement.
RMAT-rubber injection technology, its high compressed rate with ultra light weight will give runner more durable performance with spending less energy based on theory and market response. For whole bottom unite of sandal or even boot, its anti-slippery and cushioning, also rates fairly high.
why standard valuation matrix is not the best way to value great businessesperfectresearch
The presentation is an attempt to collate thoughts on the investment process we follow from the Gurus, Mentors and Friends we follow along with our own experience in this field.
*Disclaimer*
1. We are not SEBI registered analysts
2. Educational post only and not a stock recommendation
3. We take no responsibility to keep updating about the business being discussed
4. We may or may not own a position in any of the businesses being discussed and even if we do own a position, we may change our mind due to change in any facts or circumstances
5. Plz consider this post only as a framework to keep tracking businesses and understanding them
Control ExampleBusiness Name The Café Around the CornerSMAR.docxdonnajames55
Control Example
Business Name: The Café Around the Corner
SMART Goal: Increase customer satisfaction by 10% within a six month time frame.
Criterion being Measured: customer satisfaction
Time Frame For Goal Completion: six months
Explain the system that you will create to track the success of this goal?
Every month, employee surveys will go out to the customers on our mailing list. There will also be surveys attached to each receipt to reach people that haven’t signed up for email. The surveys will ask a variety of questions meant to measure the customer experience and their opinion of Café Around the Corner. All surveys will be electronic and collected in an online database that management can access. The surveys will be sorted by the employee that took care of the customer.
Why is being reliable and completing this goal on time important to the business’ success?
Accomplishing these goals will increase the reputation and financial success of the business. It’s also important to reach these goals in a timely matter as other aspects of the business are relying on me to follow through with expectations. It’s important to be professional and reliable when faced with objectives to complete.
What adjustments will you make if you fall behind completing this goal?
I will continually track the survey scores as they come in. If the business starts to fall behind, I plan on bringing in outside consultants to work with my employees. The consultants will run twice a month trainings that will focus on improving customer satisfaction. Every employee is required to attend at least one a month.
I will also begin rewarding employees that have the highest survey scores at the end of the month. This will improve motivation and create a customer service focus in the business culture. Publically sharing the monthly winners will also create recognition among the employees. These two methods will cover intrinsic and extrinsic motivation.
Pg.587
3. Universal Auto is a large multinational corporation headquartered in the United States. For segment reporting purposes, the company is engaged in two businesses: production of motor vehicles and information processing services.
The motor vehicle business is by far the larger of Universal’s two segments. It consists mainly of domestic U.S. passenger car production, but it also includes small truck manufacturing operations in the United States and passenger car production in other countries. This segment of Universal has had weak operating results for the past several years, including a large loss in 2013. Although the company does not reveal the operating results of its domestic passenger car segments, that part of Universal’s business is generally believed to be primarily responsible for the weak performance of its motor vehicle segment.
Idata, the information processing services segment of Universal, was started by Universal about 15 years ago. This business has shown strong, steady growth tha.
Assignment 1: Discussion Question
Sustainable competitive advantage is the "holy grail" of corporate strategy, but it is elusive.
Using all you have learned to date about Harley-Davidson, analyze whether or not Harley-Davidson has a source of sustainable competitive advantage. Defend your answer using examples from your readings, the annual report, and other sources.
Submit your response to the Discussion Area by Saturday, November 30, 2013.
Company Analysis project – BSAD 245 – Fall 2013
These are basic steps you may use when evaluating company cases in my graduate and undergraduate business strategy and business policy courses.
Before you start, you must understand a couple of things.
· This is not meant to be an exhaustive list; there are other steps that can be followed to get deeper into the meaning of the numbers.
· You cannot analyze the numbers in a vacuum. The numbers only provide indicators to trigger further questions in your mind.
· In order to do a thorough job, you must understand something about the company’s business and strategies, and its industry. Financial indicators vary from industry to industry; the ratios can only be interpreted when compared and contrasted with other companies in that industry. For example, financial indicators are (and should be) different among financial institutions, manufacturing companies, companies that provide services, and technology and computer information and services companies.
· Financial analysis is something of an art. Experienced managers, investors and analysts develop a data bank of information over time, and after doing many such analyses, that they bring to bear every time they review a company.
Step 1. Acquire the company’s financial statements for several years. These may be found in a recent annual report; in the company’s 10K filing on the SEC’s EDGAR database; or from other internet sources such as MSNMoney.com or Yahoo.com. As a minimum, get the following statements, for the last 3 years.
· Balance sheets
· Income statements
· Shareholders equity statements
· Cash flow statements
Step 2. Quickly scan all of the statements to look for large movements in specific items from one year to the next. For example, did revenues have a big jump, or a big fall, from one particular year to the next? Did total or fixed assets grow or fall? If you find anything that looks very suspicious, research the information you have about the company to find out why. For example, did the company purchase a new division, or sell off part of its operations, that year? You can easily calculate the dollar amount and percentage amount change for each line item.
Step 3. Review the notes accompanying the financial statements for additional information that may be significant to your analysis.
Step 4. Examine the balance sheet. Look for large changes in the overall components of the company's assets, liabilities or equity. For example, have fixed assets grown rapidly in one or tw ...
Running Head FINANCIAL RESEARCH REPORT1FINANCIAL RESEARCH RE.docxwlynn1
Running Head: FINANCIAL RESEARCH REPORT 1
FINANCIAL RESEARCH REPORT 7
Financial Research Report
Chet L. Walker
Strayer University
Dr. Inez Black
FIN 534 – Financial Management
24 May 2020
Financial Research Report
As the child of a recent retiree on a fixed income, I understand how much my mother worked for money. With that in mind, she would not be willing to work so hard for so long to frivolously squander it away in her twilight years casing risky investments. At the same time, due to her health needs, I know that I would want to make sure her money worked for her on a level to ensure she can get the care she needs without wondering how she will pay for medication or deductibles. With that in mind, I would want to find the optimum stock for her to invest in.
Since she does not have the disposable income or time to recover from a huge loss, I would suggest she invest in intermediate-cap or large-cap company, and attempt to avert little-caps names altogether. The reason startups give such high returns is because they are indeed risky investments. She has a great of a chance of bottoming out as she would striking it big. Even though some small firms would suit the older individual’s investing framework, most of her picks should follow this advice (Bunker, Cagle & Harris, 2019). Moreover, if you are participating in "best of breed" firms and unique brands which conform to the rules of Graham and Buffet investing thoughts should not be a challenge.
The next criteria I would use to help her pick a stock would be to find a stock that is a robust past performer. It may not give double-digit returns every year, and it can even be subject to an occasional lousy quarter. The overall thought process is the long-term plan has to be persuasive. I would want her to invest in a business that has made shareholders rich while avoiding a stock that has ruined stockholder value in the long run. She should invest in stocks that meet the metrics as mentioned earlier, and that has done well over a considerable duration.
Once we weed out the type of stocks to focus on, it’s now time to zero in on a particular company. I would advise her to invest in a stock that offers a simple, reasonably direct company business model. These companies usually provide a good or service that is easily understood and extremely recognizable. Since she is not an industry expert, she should avoid companies that other investors might find complicated. That company should also be considered "best in the breed."
These companies are among the best in their industry. The general rule of thumb is it is best to stick with excellent, permeating, and highly-admired brands. Additionally, if you look at the best stocks in past, have a great brand as an everyday thing. If one is looking for rapidly-emerging brands, it should not be difficult to trace one that has an antiquity of better performance. Most firms that suit this outline have a tremendous continuing traje.
The main ideology behind the conception of ERM is to help companie.docxoreo10
The main ideology behind the conception of ERM is to help companies proactively identify, analyze and manage risks and events that have the capability of impacting the business. Developing a collaborative response is crucial is possible when early identification of risk is achieved. Changes in the business environment require sound judgment in anticipating both the consequences of the particular event and the potential likelihood.
The research conducted illustrates that the difficulty is intensified because the company should be innovative and adaptive, a feature that lacks in many corporations. Following the implementation in different companies, the primary challenge posed is locating the respective area in the company where its potentiality is more enhanced. The transition has been implemented from the traditional leadership function to the various levels of operation.
One of the crucial insights obtained from the interaction with companies adopting the ERM system indicates that the change is effective especially if used in a suitable context. The funds in implementing the system may pose a challenge, however, in such a situation, a counter project can be carried out in regards to the nature of the company. So, upon implementation, the ERM program progresses from its initial establishment to a sophisticated program with prolonged use.
ERM is regarded as a complete approach and as a result, leaders can trust the program as a comprehensive approach to risk management. The plan is meant to scratch through a broad range of operational threats in the internal and external environment of the company that could impact its short term and long-term success. In conclusion, the general conclusion is right; it is true to say that ERM has enabled the provision that is crucial in fulfilling and excelling in leadership mandate.
Companies:
1- Oula fuel marketing co
2- Kuwait resort company
http://www.boursakuwait.com.kw/Stock/Financials.aspx?Stk=651&S=INC
ACT553 – FINANCIAL ACOUNTING II
FALL 2016
1. Revenue Recognition
Revenue is the largest item on the income statement and we must assess it on a quantitative and qualitative basis.
_Use horizontal analysis to identify any time trends
_Compare the horizontal analyses of the companies.
_Consider the current economic environment and the company`s competitive landscape. Given that they operate in the same industry, you may expect similar revenue trends.
_Read the management’s discussion and analysis (MD&A) section of the annual reports to learn how the companies’ senior managers explain revenue levels and changes.
2. R&D Activities
Do the companies engage in substantial R&D activities?
_Determine the amount of the expense on the income statement. You may need to look in the footnotes or the MD&A for this information. Is the common-sized amount changing over time? What pattern is detected?
_Read the footnotes and assess the company’s R&D pipeline. What are the major outcomes ...
Financial Statement Analysis Project
Valuation
Valuation
The last step of the project is to valuate the company and determine the buy price
We are going to introduce two valuation systems:
Margin of Safety price
Buy price based on Owner Earnings
2
Margin of Safety (MOS) Price
Step 1: EPS Trailing 12 month (EPS TTM)
Sum of EPS from the most recent 4 quarters (from Yahoo Finance or 10-Q)
Step 2: Future Growth Rate (FGR) – Key Parameter
You have calculated annual growth rates of Book Value, EPS, CFO, and Sales per share
Use these growth rates to come up your estimate of FGR (you just need to ball park a FGR, and it will be a rough estimate)
Your estimated FGR should be <= Analysts’ forecast of future growth
Step 3: Future EPS=EPS TTM × (1+FGR)10
Projected EPS in 10 years
Margin of Safety (MOS) Price
Step 4: Future P/E Ratio= 2 × FGR
Should be capped at historical high P/E ratio
Step 5: Future Value= Future EPS × Future P/E Ratio
Projected firm value in 10 years
Step 6: Fair Price= Future Value ÷ 4
Company’s fair value today
We want our money to double up every 5 years
Step 7: MOS Price= Fair price × 50%
I can help you with analysts’ forecast of FGR and historical high P/E ratio, as it can be challenging for you to find out
Buy Price based on Owner Earnings
This is the valuation method Buffett uses and explained in his 1986 Letter to Berkshire’s shareholders
We think of businesses like many people think of a real estate investment – a money making machine based on net profits generated
One way to look at a business is by analyzing cash flow generated after certain expenses. If you can keep a good profit after expenses and expect it to continue in the future, you have a good deal.
Buffett defines this cash flow as “Owner Earnings.”
We are looking to buy a great company at a price that will earn a 10% return (=Owner earnings) every year
Compute Owner Earnings
Pretax Income
+ Depreciation and Amortization
+/- Changes in Accounts Receivable
+/- Changes in Inventories
+/- Changes in Accounts Payable
- Maintenance CapEx (Total CapEx with Growth CapEx taken out)
----------------------
= Owner Earnings
Maintenance CapEx
Maintenance CapEx is the money the company spent to replace worn out property and equipment for the last fiscal year.
In real estate, this is like replacement of roof, countertop, carpet, and furnaces, etc.
The money spent on acquiring more real estate properties is Growth CapEx.
Most companies, however, do not separately report maintenance CapEx.
So we need to read 10-K to help us identify the maintenance CapEx.
Entry Point
Now you have two buy prices calculated. If your company is a great company you would like to own for the next 10 years, wait now until an event puts the company on sale
Great companies are often priced high (e.g., Costco, Chipotle, Ulta), and we don’t chase the stock
An event is an incident that causes the company’s stock price to decline sharply and puts the comp.
If you’re like 80% of Canadians, you’re enamoured by the idea of having your own business. Here are some questions that you need to ask, and answer before making the decision to buy a business
Nmims september 2019 solved assignments 9967480770PRADEEP SHARMA
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Module 02Required Complete the purple areas of the chart, and the.docxaudeleypearl
Module 02Required: Complete the purple areas of the chart, and the questions in the text boxes below.List the years in order of most recent as year 1, next most recent as year 2, etc. Example: If the most recent fiscal year was 2015, then replace Year 1 with 2015, replace Year 2 with 2014, and replace Year 3 with 2013.In the References box, include an APA reference for all information retrieved, whether from the Tootsie Roll websiteitself, specific forms (i.e. 10k) from the Tootsie Roll website, or other outside sources.Instructions for citing a 10k or Annual Report: http://rasmussen.libanswers.com/faq/32821 For general APA help, visit the APA Guide: http://guides.rasmussen.edu/apaTootsie Roll Industries Inc.Income Statement201520142013Total Revenue540,112543,525543,383Product Cost of Goods Sold340,090340,933350,960Rental and Royalty Cost889947937Total Gross Margin199,133201,645191,486Selling, Marketing and Administrative Expenses108,051117,722119,133Earnings from Operations91,08283,92372,353Income Taxes26,45128,43423,634Net Earnings66,12762,86060,849
Question 1: What is Tootsie Roll's Gross Profit Margin? (Hint: Divide Total Gross Margin by Total Revenue). What does this figure represent?
Gross profit margin= 36.632%
It shows the rate at which money is generated from sales after substracting cost of goods sold
Question 2:What is Tootsie Roll's Profit Margin? (Hint: Profit margin is calculated by dividing Net Earnings by Total Sales). What does this figure represent?
profit margin=12.32%
Is shows the rate at which net profits are generated from sales in a company
Question 3: What are Tootsie Roll's earnings per share in the three years presented? (Hint: Check the income statement after Net Earnings for this information.)
2013= 0.93
2014= 0.99
2015= 1.04
Question 4: According to note 1 in the Notes to the Consolidated Financial Statements, how does Tootsie Roll Industries, Inc. recognize revenue?
manufacture and sales of candy product
Question 5: Has Net Product Sales shown an increasing or decreasing trend over the past three years? Interpret this trend. Should this be a concern for the company? Why or why not?
The net trend has decreased over the past three years. There is a concern for the future of this company due to its trend. This might be due to increased competition in the industry or entry of new firms into the market.
Question 6: Has the Net Earnings shown an increasing or decreasing trend over the past three years? Interpret this trend. Should this be a concern for the company? Why or why not?
Net earnings has increased for the past three years. The reason being the company might have decrease the aftersales services, expenses and the suppliers might have decreased the prices of their products making the cost of goods sold.
Question 7: Compare the Net Product Sales trend and the Net Earnings trend. Are these two items trending the same? Interpret any differences and infer what those may mean in relation to the company.
Name:_________Zilin Li________
Name:__________Yueran Chen____
Name:__________Sylvia Tang _____
__
Accounting 211
Annual Report Analysis
Using the financial statements you have prepared for the Behrend Company, complete the following questions. Use your Excel horizontal and vertical analyses to answer the following.
Income Statement Analysis
1. By how much did net sales increase or (decrease) from 2012 to 2013? $
216600
By how much is it predicted to increase from 2013 to 2014? $
111300
2.
By what percentage did net sales increase or (decrease) from 2012 to 2013? 24.2
%
By how much is it predicted to increase from 2013 to 2014?
10.0
%
3.
Net sales can change either due to the quantity sold, or because the same quantity is sold at a different price. What is the reason for the Net Sales change for this company?
Net sale will increase if more quantities are sold and it will decrease if fewer quantities are sold (both under the condition of same price). If the same quantity is sold at a different price, the net sales will increase if the price is charge at a higher amount. The net sales will decrease if the price is charge at a lower amount.
4.
What was the COGS Percentage for the first year of operations (2012)?
-56.9
%_ What was the COGS Percentage for the second year of operations (2013)?
-55
%_ What is the COGS Percentage projected for the third year of operations (2014)?
-45
%_
5.
Cost of Goods Sold (“COGS”) decreased from the first year to the second year and from the second year to the third year. Normally, we would expect that when sales increase, the cost of those sales would also increase. How could a large increase in the quantity sold help lower the cost of each unit being purchased or manufactured for sale?
Possibility 1: since there is always fixed cost, the higher amount of goods sold lowers the fixed cost per unit sold. Possibility 2: when a company produce more goods for sold, the company is likely to get a discount from material/inventory suppliers, which lowers the product cost per unit produced. Possibility 3: When a company produces one additional good, the cost of each unit decreases. The company should produce at marginal revenue equal marginal cost to maximize profit.
6.
How much is the Company’s total gross margin in dollars in 2012? _$_
386400
In 2013? _$_
504900
In 2014? _$673365
7.
What is the total gross margin percent in 2012?
43.1
%
In 2013? _
45
% In 2014? __
55
%
8.
How much is the Company’s operating expenses in dollars in 2012_$_
-362000
In 2013? _$_
-312463
In 2014? _$_
-598944
9.
What is the operating expenses percentage in 2012? _
-49
%
In 2013? _
-28
% In 2014? _
-40.4
%
10.
What would cause operating expenses to decrease from the start-up year until the first full year, and then increase as a percentage of net sales as they ramped up their operations?
Operating expenses decrease because the company cuts its labor an.
Acct 504 mart perfect education acct504mart.comwilliamtrumpya
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Case Study 1 (Part A)Analyze the impact of business transactions on accounts; record (journalize and post) transactions in the books; construct and use a trial balance) During the first month of operation of Gordon Construction, Inc.,
Differentiating Depreciation Methods
Knowledge Session on Startup Valuation: How does a Startup approach valuations? Best Practices, Models, Examples of good and bad valuations, etc. ELEVATE 100, an initiative of the Department of Information Technology and Biotechnology, Government of Karnataka aims to provide a comprehensive entrepreneurship platform for startups. The top 100 technology based startups chosen through a rigorous hunt across Karnataka State will tap into a whopping sum of Rs.400 Cr of Government funds. This is the largest pool of funds ever offered by any State Government to Startups.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
The world of search engine optimization (SEO) is buzzing with discussions after Google confirmed that around 2,500 leaked internal documents related to its Search feature are indeed authentic. The revelation has sparked significant concerns within the SEO community. The leaked documents were initially reported by SEO experts Rand Fishkin and Mike King, igniting widespread analysis and discourse. For More Info:- https://news.arihantwebtech.com/search-disrupted-googles-leaked-documents-rock-the-seo-world/
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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Kseniya Leshchenko: Shared development support service model as the way to ma...Lviv Startup Club
Kseniya Leshchenko: Shared development support service model as the way to make small projects with small budgets profitable for the company (UA)
Kyiv PMDay 2024 Summer
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LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
LA HUG - Video Testimonials with Chynna Morgan - June 2024
Relaxo cinderella
1. RelaxoCinderella
Dear Students,
It is said that Cinderella is proof that a new pair of shoes can change your life.
I don’t know if that’s true or not. I do know, however, that if a company grows long
enough to profitably sell 100 million pairs of footwear in a year, it will very likely
change its long-term shareholders lives for the better. Relaxo Footwear, a company in
which I own shares (so you should know I am very likely biased), crossed that milestone
last year.
1
2. RelaxoCinderella
Isn’t that amazing? Why did that happen? The nation needs to know.
So, I have divided the Relaxo project into 3 parts:
1.
Business (Quality of the Business)
2.
People (Quality of Management)
3.
Price (Valuation)
This document deals only with the first part. At this time, I want you to completely
disregard the management and the valuation angles. We will discuss those later. For the
moment, I want you to try to answer a few questions by doing some investigative
analysis from the following sources (although you are free to use other sources)
https://www.dropbox.com/sh/qgwaha2ygw1tgrm/b9XDTQQGRc
http://www.relaxofootwear.com
http://www.bata.in
2
3. RelaxoCinderella
There is an excel sheet in that dropbox folder with a lot of financial data on the
company.
In an earlier mail, I had asked all of you to read up the annual reports of the company
for the last 10 years. Those reports are also in the dropbox folder.
By breaking a single project into multiple “chunks” and assigning one chunk to one
group, instead of the earlier practice of asking one group to work on one project
exclusively, I intend to bring in a bit of collaborative effort. Your co-operation would
be appreciated. And learning will improve.
We will collect all the chunks and see where all of them lead us. Deadline: Wednesday
18 Sept Midnight
All the best,
Sanjay Bakshi
P.S. One of my friends, Ravi Purohit, who is a value investor, and who has addressed
your seniors in the past, is collaborating with me on this project.
3
4. RelaxoCinderella
Group 1
Questions on Relaxo’s Wealth Creation
1.
How has the company’s stock done over the last 5 and 10 years in absolute
terms and as compared to the market?
2.
How has the company’s market cap changed over the last 10 years
3.
How has the company performed on Buffett’s earnings retention test?
How to use Buffett’s Earnings Retention Test
1.
Add up profits earned over the last 10 years.
2.
Deduct dividends paid over the next 10 years
3.
Result is total earnings retained over a 10 year period. Let’s call that ER
4.
Compute increase in market cap over the last 10 years. Let’s call that Delta MC.
5.
Compute Delta MC/ER.
6.
What does this figure tell you? It tells you, that for every Rs 1 earned and
retained inside the firm, how much was the increase in market cap.
7.
To do this more accurately one should remove the influence of base or end
period election effect. Buffett does that by calculating this ratio on a 5-year
rolling basis. For the moment, let’s just do this as described above.
4
5. RelaxoCinderella
Group 2
Has this been a good business?
1.
What has been the pre-tax return on average equity capital employed in the
business over the last 10 years? To calculate that for each year, divide profit
before tax by average of beginning and ending net worth for that year.
2.
How does that compare with AAA bond yield?
Note
1.
For the moment, we are assuming that the accounting earnings and true
economic earnings are the same. But this assumption may not be true.
2.
Hint: The assumption is false. The true economic earnings are higher than
reported earnings.
3.
Can you figure out why and by how much? Two clues: look at the cash flow
statement and on the quantum of money spent on sales and marketing.
5
6. RelaxoCinderella
Group 1 & 2
Questions
1.
What’s the connection between the work done by Group 1 and Group 2?
2.
Should there be a relationship between (1) high spread between return on
capital and AAA bond yields; and (2) Market rewarding such a business in such
a way that every rupee of earnings retained becomes much more than a rupee
in incremental market value?
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7. RelaxoCinderella
Group 3
Questions about Relaxo’s Past Growth and Business Volume Analysis
1.
Analyse the past growth in the company’s revenue and PBT growth— over 5
and 10 years
2.
How much of this growth occurred due to business volume growth? How much
occurred due to product mix and price changes? Quantify the numbers here.
3.
For each of the last 10 years, list number of pairs of footwear sold by the
company along with net revenues and calculate average price per pair for each
year. What conclusions can you draw from this data?
4.
What are the possible sources of volume growth in this company? Is there a
pattern here that you can relate to other industries? If so, what’s that pattern?
5.
Did all this growth require any equity dilution? Did it require significant debt?
What conclusions can you draw from this analysis?
6.
What is net revenue per share of this company over the last 10 years?
7.
What is the profit after tax per pair of footwear sold by the company over the
last 10 years?
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8. RelaxoCinderella
Group 4
Analysis of Profitability
1.
For every year, compute the ROIC on a pre-tax basis and segregate it into
Margin and Turnover ratios (Du-Pont Analysis).
2.
What conclusions, if any, can you draw from your analysis of margin?
3.
What conclusions, if any, can you draw from your analysis of capital turnover
ratios?
Hint: Think entry barriers. Think like a potential competitor who wants to take away
Relaxo’s market share.
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9. RelaxoCinderella
Group 5
Questions About Economies of Scale
1.
What economies of scale are available to Relaxo which won’t be available to a
new entrant in the market? Hint: Study the various line items in the cost
structure in it P&L account and the company’s working capital cycle. See work
done by Group 4.
2.
If you were a potential entrant in the branded footwear market in India,
wanting to compete with Relaxo, what challenges would you face in terms of
cost structure and terms with customers and suppliers?
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10. RelaxoCinderella
Group 6
Watch these videos:
▶ Main Pehenta Hoon - Salman Khan's New Relaxo Footwear AD !! YouTube
▶ Akshay Kumar Sparx TVC ft Shaun Wood ( Team Farang ) - YouTube
▶ Relaxo Flite (Katrina Kaif) - YouTube
Questions about Branding
1.
Imagine you as a small and unbranded player competing with Relaxo. Why is
life getting tough for you? Is this a generalised pattern in other industries too?
2.
Imagine you are a customer looking to buy a pair of footwear. Why would you
choose Relaxo over branded footwear? Why would you reject it?
3.
How much money is the company spending on a per pair of footwear on
branding?
4.
What models from psychology explain the apparent success of using brand
ambassadors?
5.
How would you value Relaxo’s brands?
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11. RelaxoCinderella
Group 7
Questions about future growth prospects
1.
How big can Relaxo become over the next decade or two?
2.
What are the various sources of growth for Relaxo? How sustainable is each
source?
3.
If that growth materialises, then would the company be able to finance it
without requiring equity dilution or significant debt? Hint: Project a high growth
rate for a decade. Use capital turnover ratios to estimate balance sheet size
required to deliver that growth. Then compare that hypothetical balance sheet
size with the current size to determine how much balance sheet expansion will
be needed over the next decade. Then see if earnings would suffice or the
company would need to fill the gap with new equity capital injection and/or
debt.
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12. RelaxoCinderella
Group 8
Comparison with Bata
1.
Compare and contrast the P&L accounts of both companies and relate the
differences to the different strategies followed by each company.
2.
Which is a better strategy and why?
3.
Why don’t you see Relaxo in a mall but you you see Bata over there?
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13. RelaxoCinderella
Group 9
Questions on Dividend Policy and Capital Structure Decisions
1.
What percentage of earnings did the company pay out as dividends over each
of the last 10 years?
2.
Should this company pay any dividend at all? Why or why not?
3.
Is this company’s capital structure conservative? Use balance sheet and cash flow
data to answer this question.
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14. RelaxoCinderella
Group 10
Questions on Sources of Competitive Advantages and Longevity of
Business
1.
What are the various sources of competitive advantages enjoyed by Relaxo
footwear? Hint: See questions posed to other groups.
2.
Think about the sources of competitive advantages from two perspectives of: (1)
Customers; and (2) Competitors. Why would customers want to stay with
Relaxo or desert it? What would cause a competitor to enter or not enter into a
competitive war with Relaxo?
3.
How long will the business of making and selling branded footwear last?
Ends
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