Look at the financial statements excerpted from the Foundation FastTrack and answer the following questions, explaining the reasons and justification for your answers.
1) Look at the income statement survey. Notice that both Baldwin and Ferris have sales revenue worth $46.8 million. However, Baldwin is making losses of $1.3 million while Ferris is making profits over $3 million.
a. Why is Baldwin selling well but making losses?
b. What could Baldwin have done differently to avoid making negative profits?
2) Look at the income statement survey.
a. Calculate the contribution margin and the net profit margin (return on sales) for Baldwin and Ferris. Compare the two companies and analyze the differences in their financial management based on your calculations.
b. Calculate SGA as a percentage of sales revenue for both Baldwin and Ferris and analyze the differences in their financial management.
3) Why does Digby have the highest sales in the industry but not the highest profits?
4) Calculate the ROS for the six companies. Which company is the most profitable?
5) Calculate the contribution margins of the 6 companies. Which company has the best contribution margin? Is this good enough? Why or why not?
6) Look at the production page of the FastTrack below and explain why the company with the highest contribution margin in question 5 was able to achieve this.
7) Calculate the Net Margins for the 6 companies. Which company has the highest Net margin? Is this good enough? Why or why not?