Expect to provide a basis understanding of the company’s recent situation ND future valuation. The company we compared, as a part of the surfaces industry is Quicksilver. Blabbing is a multi-brand Australian company that was established by Gordon and Rena in 1973 in Gold Coast. After decades of expansion and restructuring of capitalization, Billings shares have publicly listed on the ASS. Using four-step to analysis Blabbing which including business strategy analysis, accounting analysis, financial ratio analysis and prospective analysis that would help a great deal in valuation of Blabbing based on its current market situation.
Business strategy includes continuous acquisitions and merges like taking over strong brand and the products in the same sales area and expansion internationally by reaching more than 100 countries around the world. Blanding’s multicultural design of products featured new and fashion captures customer loyalty among targeted youth group. In order to ensure the company’s accounting information reflects its business reality. Three steps of accounting adjustments are taken in preparation for financial analysis, forecasts and valuation. First is to recast financial statements.
This contains re- classifying accounts and preparing standardized balance sheet and income tenement, using both reported statements and information from footnotes. After that is to identify accounts that should be adjusted. By analyzing notes and reports, three accounts are likely to contain distortion information: provision for doubtful debts, leased assets and liabilities and goodwill. Last step is to make adjustments with accounting equation using more appropriate estimations and assumptions for the fiscal year from 2009 to 2011.
The profitability of Blabbing is unstable from financial analysis. However, compare with the other competing company, Blabbing has higher ROE and ROAR. The ability of Blabbing sale its inventories decreased as its inventory turnover ratio decreased. It had a good control in liquidity with relative constant current ratio and quick ratio. However, it had decreased ability on uniting long-term asset and control its debt structure. Lacking of good control on debts structure and may face burden on debt expense, which may result a high financial risk and weak solvency.
From prospective analysis, Blabbing may be more profitable in the future after the reorganization, the decreasing sales growth may be appeared at first few year and then increase again. The ROE of the company will be higher than last year; the company may have better performance in the future. And the company may borrow or finance the equity for the operation or paying the dividend. 1. Introduction 1. 1 Background Blabbing is a famous Australian company with many brands, such as Element, Custom and Excel. Their main products are including clothing, watches and broadswords hardware.
As surfing became more popular, the company constantly expanded its scale and exported its goods to Japan, USA and Europe during the asses, after that Blabbing achieve leader in surfing area. In the recent ten years, Blabbing had restructured its capitalization with growing global opportunities in the broadswords sector. 1. 2 Business Strategy Analysis The business analysis through three aspects: industry analysis, competitive analysis and corporate strategy analysis. A. Industry Analysis With the expansion of world economy, surfing is not only a sport but also a life style and that leads to high demand of surfing products.
The number of firms enters that industry keep increasing as its attractive potential profits and less barrier to enter into that industry. Both companies have more bargaining power compared with their supplier and customer as their famous brand and diversified products could encourage suppliers to have long term business relationship with the company and satisfy the unique needs of customers. Overall, the prospects of this industry are optimistic; it did not shock too much under the downturn of economy. Surfing is an increasingly popular and well- known culture; companies need to continuing innovation in order to satisfy customer’s needs. . Competitive Analysis As number of firms in the industry keeps increasing, greater competition force rims to earn more market share, innovate substitutes, produce differentiate products and be cost leadership to keep or improve their position in the industry. For example, some of the products of Blabbing and Quicksilver are similar, consumer will choose to buy the one with lower price if they have similar function, or buy the one with higher price if the product is different from others. Thus, a firm could run well if it has different products and lower cost compared with rivals. . Corporate Strategy Analysis Blabbing hires different design teams for each different region to satisfy with customers from different cultural with different traditions and tastes. Blabbing is expansion through strategic takeovers during last 1 0 years looking increase profitability through business synergies. Currently the group has direct company on operations and more than 50 countries. Sales are more than 1 00 countries under 13 different brands. The strategies expansion has been changing along with company’s growth.
Blabbing started with exportation of products to the USA and also licensed follow by relocated production off shore; FED is the current global expansion strategy. Blabbing buys bank licenses to take control of global operations and requires the existing business. 2. Accounting analysis Blanding’s performance from 2009 to 2011 shown downward trends in profitability and market performance, therefore, it is possible that manipulation exists. In order to compare Blabbing with other companies, standardized format and accounting equation-based adjustments are required. . 1. Recast financial statements Because of the differences in the format of Blanding’s financial statements over years and that with other organizations, standardized financial statements should be made in preparation for accounting analysis, financial analysis and respective analysis. 2. 2 Accounting adjustments 2. 2. 1 Adjustments of revenues and provision for doubtful debts As can be seen in appendix, PDP (6. 4%) has declined since 2007. Therefore PDP should be adjusted to 6. 4% for the years 2008-2011.