Established in 2005, More Vino LTD. aims to be the leading wine distributor in the local market. They offer wine enthusiasts across the nation an exceptional selection of wines sourced from various countries worldwide. Their collection includes a diverse range of wines from Argentina, Australia, Chile, France, Germany, Italy, New Zealand, Portugal Spain, South Africa and U.S.A., including rare finds not commonly found in local markets.
Initially, More Vino entered the market with a liquor store that served both retail and wholesale customers. The store provided exclusive brands and the Republic of Trinidad and Tobago’s largest wine selection.
Based in Trinidad, which has a population of 1.3 million and is the larger and more populous island, More Vino Distributors was established in 2006 to revolutionize local alcohol distribution and supply.
The company offers competitive prices on a diverse range of wines, spirits, beers, and cigars, along with the added convenience of doorstep delivery.
The company’s sales grew significantly by 100.7% from 2006 to 2007, thanks to its unique advanced service and increasing popularity among young professionals as an after-work spot. The company aims to expand seating capacity to 250 and introduce new initiatives such as wine-tasting events, special promotions, and the More Vino wine club in order to attract and retain a loyal customer base. Despite experiencing net losses of $2,015,034 in 2006 and $987,122 in 2007, the company managed to reduce the net loss by $1,027,912 in 2007.
Meanwhile, the COGS decreased from 77.2% of sales (2006) to 65.1% of sales (2007), indicating that More Vino is becoming profitable and will be successful in the long run.
Furthermore, operations analysis reveals that More Vino experienced a decrease of 47.5% in current assets, from $1,411,410 in 2006 to $740,754 in 2007. However, during the same period, NFA increased by 102.8%. This significant change can be attributed to two factors: Firstly, there was a decline of inventory by 47.8% from 2006 to 2007 suggesting a faster product turnover rate in 2007 compared to previous year.
The company’s efficiency in operations is demonstrated by the decrease in Days in Inventory from 149 days in 2006 to 46 days in 2007. The change in Net Fixed Assets (NFA) is primarily due to increases in leasehold improvements, Furniture and fixtures, and Equipment. This finding is supported by the cash outflow from investing activities. In contrast, the Fixed Asset Turnover (FAT) remains constant at 5.8, while the Total Asset Turnover (TAT) increases from 2.0 to 3.9. These results indicate that the company effectively utilizes its assets to generate revenue.
The TAT 3.9 demonstrates that the company is not heavily reliant on assets. Additionally, the Average Collection Period has decreased from 2.15 in 2006 to 0.47 in 2007, indicating a faster rate of collecting money from customers in 2007. This further supports the notion of more efficient operations in 2007. The well-educated Stones brothers, who are the owners, play a significant role in ensuring efficiency, and investments from Greenway and Moore are also crucial. Therefore, a financial analysis is warranted.
Greenway and Moore, who both hold two third ownership of More Vino LTD, play a crucial role in determining the company’s success by deciding whether to continue investing their money. The company’s health is compromised as the current ratio dropped from 0.7 to 0.3 in 2007 and the quick ratio remained close to zero in both 2006 and 2007, indicating insufficient resources to meet short-term obligations. However, there is a positive trend seen in the Time Interest Earned, which increased from negative 2.6 to positive 0 in 2007, suggesting an improvement in the company’s ability to handle debt obligations, although it remains weak. Analyzing the cash flow statement, we observe that the company primarily finances itself by increasing shareholders’ loans by $666,000 and utilizing a bank line of credit of $67,850. The company acquires resources mainly by increasing accounts payable by $817,134, amortization by $232,104, and decreasing inventory by $650,160, indicating that it obtains more credit from suppliers and converts inventory into sales at a faster pace.
Despite using the money obtained in 2007 for paying off its bank loan and purchasing more fixed assets, the company experienced a decrease in cash for the year. This suggests that the company’s financing activities are risky and unhealthy. Although the company is profitable with a gross profit margin of 34.9% in 2007, both its operating profit margin and net profit margin remain negative. However, upon closer examination, there has been a significant improvement in both margins from 2006 to 2007. The operating profit margin decreased from -36.5% to -3.6%, while the net profit margin decreased from -46.7% to -11%. Despite these figures remaining negative, it indicates an improvement in the company’s financial performance.
In addition, More Vino did not distribute any dividends in both 2006 and 2007, and their common stock remained unchanged. This stability suggests that shareholders have confidence in the company’s future success.
Lastly, the negative retained earnings of $3,002,156 in 2007 indicate that the company has accumulated a deficit primarily due to net losses. Therefore, urgent funding is needed.
More Vino has emerged as the newest local hotspot for food, drink, and entertainment, gaining popularity for its efficient operations. Despite incurring a net loss in 2007, this setback is temporary as future years are projected to yield profits. Presently, the company’s inability to fulfill short-term debts persists due to financial constraints; however, the positive trend suggests that they will achieve their financial objectives with assistance from Greenway and Moore. Allocating additional funds into the business entails some risk given its current unfavorable financing situation. Nevertheless, it is important to acknowledge that substantial returns often come hand in hand with considerable risks.
