Best Buy Company, Inc. Analyze this company’s financial condition

Question

Best Buy Company, Inc. Analyze this company’s financial condition
	Year 1	Year 2	Year 3	Year 4	Year 5
Assets
Cash	$23,830	$27,063	$112,789	$7,138	$59,872
Receivables	7,318	8,716	15,981	37,968	52,944
Inventory	92,991	95,684	135,838	249,991	637,950
Prepaid expenses	3,224	7,602	856	332	756
Other current assets	642	541	7,627	9,497	13,088
Total	128,005	139,606	273,091	304,926	764,610

Net plant and equipment	27,359	39,572	58,250	126,442	172,724
Other assets	1,423	6,350	5,877	7,774	15,160
Total assets	$156,787	$185,528	$337,218	$439,142	$952,494

Liabilities
Current portion of long-term debt	$2,598	$4,444	$38,096	$5,740	$8,899
Notes payable	0	0	4,174	8,571	11,156
Account payable	29,710	41,900	68,670	118,338	294,060
Taxes payable	3,223	2,178	1,496	6,545	11,694
Accruals	9,948	11,770	19,514	30,571	57,073
Other	4,128	14,691	14,324	16,240	19,146
Total current liabilities	49,607	74,983	146,274	186,005	402,028
Long-term debt	35,099	35,381	14,884	48,130	210,811
Other liabilities	5,931	18,423	18,492	22,724	28,211
Net worth	66,150	56,741	157,568	182,283	311,444
Total	$156,787	$185,528	$337,218	$439,142	$952,494
Revenues	$512,850	$664,823	$929,692	$1,619,978	$3,006,534
Net income	5,683	(9,457)	9,601	19,855	41,285

Best Buy Co., Inc. Analyze this company’s financial condition (continued)
	Year 1	Year 2	Year 3	Year 4	Year 5	Industry average
Liquidity
Current ratio	2.58×	1.86×	1.87×	1.63×	1.90×	2.10×
Quick ratio	0.71×	0.58×	0.93×	0.30×	0.32×	0.60×
Receivables to working capital	9.30%	9.30%	13.50%	12.60%	14.60%	14.00%
Inventory to working capital	118.60%	122.10%	210.20%	197.10%	176.00%	124.00%

Debt
Debt to equity	137.00%	226.90%	114.00%	140.90%	205.80%	77.5
Current debt to equity	75.00%	132.10%	92.80%	102.00%	129.10%	55.70%
Times interest earned (given)	12.51×	2.40×	12.64×	26.75×	29.18×	N/A

Causal ratios
Fixed assets to net worth	41.40%	69.70%	36.90%	69.40%	55.50%	33.40%
Net sales to net worth	7.75×	11.72×	5.90×	8.89×	9.65×	4.56×
Profit margin	1.10%	(1.40%)	1.03	1.23	1.37	3.20
Net sales to inventory	5.52×	6.95×	6.84×	6.48×	4.71×	6.50×
Collection period (days)	5.14	4.72	6.19	8.44	6.34	11.00
Misc. assets to net worth	8.00%	25.50%	9.11%	9.66%	9.31%	N/A

DuPont analysis
Profit margin	1.10%	(1.40%)	1.03	1.23	1.37	3.20
Asset turnover	3.27	3.58	2.75	3.69	3.16	2.03
ROA	3.60%	(5.02%)	2.85	4.53	4.32	6.50
Equity multiplier	2.37	3.26	2.14	2.40	3.05	2.29
ROE	8.53%	(16.64%)	6.07	10.87	13.24	14.89

Accepted Answer

Overall, this is an example of a company with a large fixed asset to net worth and trading ratio. Similarly, its profit margin is low and profits are below average. Its debt ratios are large. This is an example of an overtrader.

Question 6.DC.1: Best Buy Company, Inc. Analyze this company’s financial cond...

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