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Running head: FINANCIAL ANALYSIS OF EASY TURN TOY COMPANY

Financial Analysis of Easy Turn Toy Company
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Institution

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FINANCIAL ANALYSIS OF EASY TURN TOY COMPANY

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Financial Analysis of Easy Turn Toy Company
The company deals in the manufacture and sale of particular type of toy and has been
operational for three months. The firm was in need of additional finance to boost its operations.
However, the organization needed to convince the bank that it had a bright future that would
enable it to repay the loan. In the first quarter, Easy Turn Toy Company recorded sales of 20,000
units in January, 30,000 units in February, and 40,000 units in March. The organization had
predicted to register sales of 30,000 units in April and it would increase by 10,000 units per
month up to the end of the third quarter. Thus, the firm would have sales of 80,000 units in the
month of September. Easy Turn Toy Company sold the units at $3 each while the cost of
producing a unit was $2.10. Besides, the firm would receive 30% of the sales in the month of
sale while giving a discount of 2%. It would further receive 60% of the sales in the second month
and 8% in the third month. The firm has also established that it has a bad debt of 2%. This paper
provided an analysis of the financial performs of Easy Turn Toy Company to establish if it
should receive the requested AFN.
Income Statement Analysis
Easy Turn Toy Company would have unsold goods of 40,000 units between April and
June and another 40,000 units between July and September. It also had a safety stock of 20,000
units giving it a total of 210,000 units of inventory at the end of the third quarter in September.
The total revenues for Easy Turn Toy Company would be $318,480 which is a 21% rise from the
first quarter sales. The third quarter revenues would be about 201% of the first quarter sales. The
net income for the organization rose by 151% from the first quarter to the second quarter while
that of the third quarter was only 32% of that registered in the first quarter. The study found that

FINANCIAL ANALYSIS OF EASY TURN TOY COMPANY

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the net margin for the company rose with a smaller margin in the third quarter despite a rise in
the gross revenue in the fiscal period.
Balance Sheet Analysis
Easy Turn Toy Company total assets almost doubled between the first quarter and the
second quarter. The company registered a rise in the total assets from $353,480 in the first
quarter to $456,980 in the second quarter and 4606,080 in the third quarter. The growth in the
total assets was partly due to the rise in the inventories from $72,000 in the first quarter to
$156,000 in the second quarter and $240,000 in the third quarter. Notably, there was a rise in the
liabilities and equity as well. The growth in the stockholders’ equity occurred due to the growth
in the retained earnings. Easy Turn Toy Company did not pay any dividend during the period.
There was also a great rise in the liabilities due to the sales commission and expense from 10,000
in the first quarter to $211,260 in the third fiscal quarter. The total assets of the company grew by
71% while the retained earnings rose by 383% over the period.
Profitability
The study found that the company had net margin f 2.33% in the first quarter and it grew
to 4.82% in the following period before dropping to 1.52% in the third quarter. The operating
margin also...