Accounting

Manelcom, Inc.
Statement for Cash flows for
The Year Ended December 31, 2008
Cash Flows from operating activitiesNet Income After Taxes44,220 Depreciation 20,000 Change in Accounts Receivable(50,800) Change in Inventories120,800 Change in Accounts Payable 29,600 Change in Accruals 4,000 Cash Provided By Operating Activities 167,820Cash Flow from Investment Activities Increase in Gross Fixed Assets  (36,000) Cash Provided by Investment Activities        (36,000)Cash Flow from Financing Activities Change in Notes Payable 25,000 Change in Long Term Debt               101,180 Change In Stockholders Equity 0 Dividends Paid (22,000) Cash Provided by Financing Activities104,180Net Increase in Cash and Marketable Securities 236,000The operation side of company is not performing very well as we can see that the difference between the last years Net Income and this years Net Income is 43,740. This dramatic decline must impact negatively on companys future plans of extension because company didnt get what it desires to achieve it future goals. There is a significant change in Accounts Receivable and it was increased by 50,800 which impact negatively on cash reserves of the company and company must wait a little longer to get cash owed by customers. We use a big amount of cash for purchasing inventories this year, management should monitor inventory to minimize the amount keep on hand to avoid purchasing of extra inventories. We should use accounts payable and accruals as a tool to increase our cash reserves, but our purchases must not be greater than total sales due. We must pay our bills on due dates unless there is a discount for early payments. We use 36,000 to increase our gross fixed assets, if company would plan to open an office in Miami, management must avoid purchases unless until necessary. Company must apply to acquire new debt from bank to improve its debt ratio and increase the leverage. There is no change in Stock holders equity, management must think about issuance of new shares to get cash and to stabilize the condition of company. The net increase in cash and marketable securities is not well enough that of last year, management must take serious steps to improve the operating performance of company to stabilize the financial condition.

2) Earnings per Share

Earning per Share for 2007
87,960100,000  0.8796share

Earning per Share for 2008
44,220100,000  0.4422share

The EPS in 2007 is 0.8796share but in 2008 it declines to almost half of it that is 0.4422share. This dramatic decline in EPS may harass the shareholders and in result they may selling out there shares because of poor performance of company. Company must improve its performance to avoid any type of misunderstanding between company and share holders.

3) Liquidity Ratio
Current Ratio 1650800540200 3.05X
Quick Ratio 1650800-836000540200 1.50X
Activity Ratio
Inventory Turnover 3250000540200 6.01X
Average Age of Inventory 3656.01 60.73 days
Average Collection Period 402000385000036538.11 days
Average Payment Period 1752000.833250000365 24 days
Fixed Asset Turnover 3850000360800 10.67X
Total Asset Turnover 385000016508002.33X
Financial Leverage Ratio
Debt Ratio 5402001650800 32.72
Time Interest Earned Ratio 149700760001.96X
Fixed charge Coverage Ratio 1497004000040000760001.63
Profitability Ratio
Gross Profit Margin 6000003850000 15.58
Operating Profit Margin 1497003850000 3.88
Net Profit Margin 442203850000  1.14
Earning per Share 44220100000  0.4422
Return on Total Assets 442201650800 2.67
Return on Total Equity 44220685988 6.44
Market Ratios
PriceEarning 60.4422 13.56X
Market to Book Ratio Book Value share 460000100000 4.6
64.6 1.30X

EvaluationYearIndustry AverageCross-
SectionalTime-
SeriesRatio20072008200820082007-2008OverallLiquidityCurrent2.33X3.05X2.7XGoodGoodGoodQuick0.84X1.50X1.0XGoodGoodGoodActivityInventory Turnover4.00X6.01X6.0XGoodGoodGoodAverage Collection Period37.35 days38.11 days32.0 daysPoorPoorPoorFixed Asset Turnover9.95X10.67X10.7XOkOkOkTotal Asset Turnover2.33X2.33X2.6XOkOkOkDebtDebt Ratio32.7832.7250PoorOkOkTimes Interest Earned3.34X1.96X2.5XGoodOkOkFixed Charge Coverage2.431.632.1GoodOkOkProfitabilityGross Profit Margin16.5515.58NANAOkOkOperating Profit Margin6.093.88NANAPoorPoorNet Profit Margin2.561.143.5PoorPoorPoorEarnings per Share0.87960.4422NANAPoorPoorReturn on Total Assets5.982.679.1PoorPoorPoorReturn on total

Equity13.256.4418.2PoorPoorPoorMarketPriceearning9.66X13.56X14.2XOkGoodOkMarketbook1.84X1.30X1.4XOkOkOkCurrent ratio of company is comparatively good enough from last years ratio and industry average Ratio. Companys liquidity position is very good. Companys quick ratio is also good in comparison with last years ratio and industry average ratio. Company is able to pay its current liabilities if the accounts receivable can be collected. The inventory turnover ratio shows that company holds not much inventory in hand and it is productive and it represents investment with high rate of return. The ACP is very much poor and the delay in collecting receivables is well above then industry average. Fixed asset turnover is improved and company is using its fixed assets as intensively as other firms do. Companys total asset turnover ratio is somewhat low, indicating that the company is not generating a sufficient volume of business. Debt ratio shows that the financing provided by shareholders is much more then from long term debts and the industry trend is half financing from debt and half from shareholders. TIE ratio shows that company is covering its interest by a moderate margin of safety company would face difficulties if it attempted to borrow additional funds. Companys fixed charge coverage ratio is well below the industry average it seems that the company is relatively high level of debt. The net profit margin is below the industry average and its just because company must have to pay around 50 of its income as interest. ROA is very low and its just because of companys low basic earning power and high interest costs. ROE is also very much lower than last year and industry average it shows that the stockholders didnt sufficient return on their investment. PE is below the average shows that company is somewhat riskier than most. MB ratio is below the average it shows that investors are not willing to pay more for a dollar of companys book value.  

4) DuPont Analysis
ROA 1.142.33 2.65
Manelcom Inc. made 2.65, or 2.65 cents on each dollar of sales, and its assets were turned over 2.40 times during the year. Therefore, the company earned a return of 2.65 on its Assets.
FLM 1650800685988 2.40X
ROE 2.652.40 6.36

The return on equity is 6.36, or 6.36cents on each common stock share. Therefore, the company earned a 6.36 return on its equity. The biggest weakness of the company is hike in expenses even though their sales have increased the rise in expenses has almost halved their income. Another weakness is that the stock prices of the company is fallen, which means they cant rely on raising more equity to finance the opening of the new office. Also their average days to recover receivables are much higher as compared to the average days for payables. The good thing is that the company is highly liquid and the turnover is pretty good.

5) Through the year 2008 the cash inflows are pretty much lower than the previous year. Opening office in Miami, Florida, to promote sales to Caribbean and Latin American markets would cost 85,000 more to cover the expenses of that office per year. The financial position of company is not in that condition to afford that expense because of dramatic decline in companys yearly profit and EPS. There is no guarantee that the marketing development plan would succeed. During 2-3 years of marketing development plan, company must bear all the expenses which may also affect its performance in coming years. To improve the companys overall performance management must take steps and consider the key issues which are affecting the financial condition of the company. First of all company should establish good credit policies for sales on credit. Age accounts receivable monthly and follow well defined collection methods. Company should lease equipments instead of purchasing them and monitor inventory to avoid excessive purchasing. Sell out some assets to improve total assets turnover. Company must control its expenses specially COGS. Even though sales has increased, the rise in expenses affect badly on their income. Company must control its expenses to increase its profit. These higher expenses will result in low net profit margin and as a result EPS falls down. Company should raise its funds by borrowing, management must avoid raising funds through equity because the share prices is already fallen and if they issue new shares, this will bring down the share prices in the market. Company should increase its sales and prices to improve its financial condition. Company must review its financial policies to stabilize the financial condition of the company.