1200 words

The financial team has been properly selected and charged to proceed with their analysis of EEV's financial statements. In the course of their evaluation, they will be assessing the firm's operating performance, benchmarking their competitors, and looking at the industry using financial ratios as their source of measurement. However, the chief executive officer (CEO) of Electronic Equipment USA agrees with numerous practitioners who promote the use of nonfinancial measures as well as financial measurements to evaluate the performance of a given firm. Nevertheless, Tony agrees that nonfinancial measurements can be valuable, and he tends to support the premise that when evaluating operating performance, benchmarking competitors, and comparing industry results, nonfinancial measurements have little measurable value.

The CEO of the parent company agrees with numerous practitioners who promote the use of nonfinancial measures as well as financial measurements to evaluate the performance of a given firm. Nevertheless, Tony agrees that nonfinancial measurements can be valuable, and he tends to support the premise that when evaluating operating performance, benchmarking competitors, and comparing industry results, nonfinancial measurements have little measurable value.

Tony has asked you to present a position paper comparing the effectiveness and reliability of using financial measures as opposed to nonfinancial measures. Include the following:

Provide an analysis of the utilization of assets in terms of efficiency (or inefficiency).

What are measurements associated with returns and activity ratios?

Explain why you selected each specific measurement.

Then, review the electronic equipment industry using financial ratios.

Assess the firm's operating performance against these ratios.

Research the financial reports of 1 company in the electronic equipment industry, and compare it with the performance of Electronic Equipment Venture.

Include an Excel spreadsheet to support your analysis.

Use this information to support your position, and compare the effectiveness and reliability of using financial measures as opposed to nonfinancial measures.

Electronic Equipment Venture

Balance Sheet

(In Thousands)

2008

2009

2010 Fcst

Assets

Cash

300

130

100

Accounts Receivables

5400

6700

8800

Inventory

6700

9000

12000

Total Current Assets

12400

15830

20900

Net Plant & Equipment

1500

1530

1700

Total Assets

13900

17360

22600

Liabilities

Accounts Payables

3000

3100

4800

Notes Payables

450

600

1200

Accured Taxes

300

350

900

Current portion of long-term Debt

200

200

200

Total Current Liabilities

3950

4250

7100

Long-term Debt

1800

1700

1600

Shareholders equity

8150

11410

13900

Total Liabilities and Net Worth

13900

17360

22600

Income Statement
Thousands
			2008	2009	2010 (Fsct)
Net Sales			98800	108000	113500
Cost of good sold
Total cost of good sold			68500	80250	85425
Gross Profit			30300	27750	28075
%			31%	26%	25%
Expenses
General & Administrative			3500	5300	5700
Marketing			7500	8500	9000
Operating Expense			9900	10610	11120
Total Expenses			20900	24410	25820
Income Before Taxes			9400	3340	2255
Taxes			3760	1336	902
Net Income			5640	2004	1353
Headcount
Direct			2080	2400	2500
Indirect			320	350	400
Total Headcount			2400	2750	2900
Products			2008				2009				2010 Fcst
		Sales	Margin	%		Sales	Margin	%		Sales	Margin	%
Electronic Equipment
Television		4000	1000	25%		3500	900	26%		5000	1045	21%
Computers		5000	2400	48%		5200	2300	44%		7600	3300	43%
Medical		2300	1500	65%		3500	2000	57%		4000	1800	45%
Automotive		15000	3200	21%		16000	2800	18%		15400	3000	19%
Electronic Equipment Total		26300	8100	31%		28200	8000	28%		32000	9145	29%
Electronic Equipment Parts
Television		12000	3200	27%		13000	3050	23%		12000	2230	19%
Computers		44500	13000	29%		50000	10500	21%		48000	10500	22%
Medical		6000	3500	58%		7000	3700	53%		7500	3700	49%
Automotive		10000	2500	25%		9800	2500	26%		14000	2500	18%
Electronic Equipment Parts Total		72500	22200	31%		79800	19750	25%		81500	18930	23%
Total		98800	30300	31%		108000	27750	26%		113500	28075	25%