AFM211 Lecture Notes - Lecture 7: Gross Margin, Rainwater Tank, Loan Covenant
30 May 2018
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This business manufacturing plastic products
• First product shed: business model
• Customer: bought by home owners
• Channels: online and 95% Eagle (retailer)
• Business Activities: R&D, Source (purchase supplies), Manufacture, market, sell
• Resources: production facility (capacity constraint)
• Value Prop: Durable, Low maintenance, variability (different colours), cheaper, easy to
assemble
Industry averages for ratios
Vertical analysis for industry and balance sheet
Bank loan covenant
Taking place in 2011: check the F/S, it only contains the past years, so a year over
WestCo ought soe of her shares, ow she wats it ak eause she does’t wat to lose otrol.
• WestCo owns 40%, senior managers own 5%, the owner owns 55%
Stakeholders:
• WestCo
• Eagle- 95% of sales. They have a 3-year exclusive
• Senior management team
• Suppliers: JIT inventory but premium price paid
• Ower’s father- father owned the plant and also gave guarantee to the bank
Requirement:
• looking at exhibit 4: categorize them into short term financing, liquidity, long-term, and profitability
• looking at exhibit 3: look at revenue growth
Revenue growth:
• What happened?
• YOY revenue growth:
• 2007: 74%
• 2010: 22.2%
• Note when you are a small company its easier for growth
• Why did it happen? Look at revenue streams
• Different product → keep selling sheds
• Intro Rain barrels in 2007
• Intro patio furniture and planters in 2009
• What to do? Calculate the revenue and see the product mix (the percentage of revenue that
came from each product). Then calculate YOY for each product
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Taking place in 2011: check the f/s, it only contains the past years, so a year over. Westco (cid:271)ought so(cid:373)e of her shares, (cid:374)ow she wa(cid:374)ts it (cid:271)a(cid:272)k (cid:271)e(cid:272)ause she does(cid:374)"t wa(cid:374)t to lose (cid:272)o(cid:374)trol: westco owns 40%, senior managers own 5%, the owner owns 55% They have a 3-year exclusive: senior management team, suppliers: jit inventory but premium price paid, ow(cid:374)er"s father- father owned the plant and also gave guarantee to the bank. Calculate the revenue and see the product mix (the percentage of revenue that. Intro patio furniture and planters in 2009 came from each product). Look at revenue drivers (splits into price and quantity: from the case, we can see that the price is fixed, so no change, so, all of the revenue growth is due to increase in unit sales. Continued- why people buy: home owners like products better than competitors (wood products for now)
