Calloway Golf Company - A Global Company Analysis

timer Asked: Jan 26th, 2019

Question description

After reading assigned chapters, as well as the Guide to Case Analysis and Ratio Analysis Table in the Week 2 Course Content, students should then create a company analysis of Calloway Golf Company.

The student must do original research on Calloway Golf Company (above link goes directly to company investor page). A minimum of 5 completely different and credible sources are required and “NO SOURCE CAN BE OVER 1 YEAR OLD,” older sources will not count toward assignment satisfaction. Students may use more than 5 sources and it is strongly encouraged to do so. Students cannot use a source more than 2 times in a row for a paragraph. The third usage in a row will be considered plagiarism and the entire submission will receive a zero. All assertions that students make in this submission must be accompanied by an in-text citation and reference. If you do not support yourself using appropriate citations within the text of the submission, then the entire submission will receive a zero. References without citations will be counted against the submission. High similarity scores in Turnitin will receive a zero.

Students need to answer the following questions in their company analysis:

1. Chapter 1 - 4

Identify the specific methods Calloway Golf Company is using to enable their strategy and explain how it has evolved over the past couple years. Do they have a winning competitive strategy for their industry or not?

2. Chapter 4 *Use revised Ratio Analysis Table*

You are to summarize five type of ratios (i.e. profitability, liquidity, and others) and consider past three years in this analysis. Conduct further research on this company and their industry in order to get their most recent financial reports. Students need to select and calculate at least five (5) financial ratios, from different subgroups, to assess how well the Calloway Golf Company's strategy is working compared to two major competitors. Students must clearly show their work for these calculations and explain how these results impacted understanding of whether their strategy is winning or not.

3. Chapter 5

Examine the five competitive strategy options (low cost, broad differentiation, focused low cost, focused differentiation, and best cost). Which strategy does Calloway Golf Company use? Provide at least 3 decisions that Calloway Golf Company uses that explains your strategy choice. In competitive situations sometimes companies need to change their strategy. This may happen to your company in the simulation. Please indicate 3 key decisions that would be needed to move Calloway Golf Company to two different strategies. For example, let’s say you determined they currently use a low cost strategy. What specifically should Calloway Golf Company implement to move to say a best cost and/or focused differentiation strategy?

4. Overall

Considering your research and analysis from Question 1 through 3, what specific recommendations would you make to Calloway Golf Company Board of Directors to improve their competitive position? Be specific with a minimum of three strategic improvements (consider financing, marketing, and operating decisions), the estimated impact they would have on the company’s goals/objectives, and prepare a plan to implement the recommended improvements over the next year.

These company questions require students to evaluate how to apply the Chapter 1, 2, 3, 4 and 5 reading in the company analysis. Students need to apply the Guide to Case Analysis concepts in their research and answers to these questions. This submission requires an APA paper with all sources cited and referenced appropriately using credible and current research (see APA and Research Requirements in the Course Materials folder). Students need to complete this individually and submit this assignment using this dropbox by the deadline. Review grading assessment rubric with these instructions for further requirements that apply on this assignment.


Table 4.1 Revised by Dr. Robin Wilber: Ratio analysis includes both a cross-sectional analysis and a time-series analysis. The cross-sectional analysis compares differe ratios at the same point in time. In your assignment you are expected to choose at least one ratio from each category below selected firm's ratio to at least two other firms in the same industry. Time series analysis evaluates the firm's financial perform see if the trend is increasing, decreasing or staying the same. In this case analysis you are expected to include a three-year tim the firm and for the same competitors used in the cross-sectional analysis. Use the most current data and cite your source an Key Financial Ratios: How to Calculate Them and What They Mean Ratio How Calculated Profitability Ratios enable analysts to evaluate the firm's profits with respect to sales, assets, or owner's investments. 1. Gross profit margin (Revenues - Cost of goods sold) / Revenues 2. Operating profit margin (or return on sales) (Revenues - Operating expenses) / Revenues or Operating income / Revenues 3. Net profit margin (or net return on sales) Profits after taxes / Revenues 4 . Total return on assets (ROA) (Profits after taxes + Interest) / Total assets 5. Return on stockholder’sequity (ROE) Profits after taxes / Total stockholders' equity 6. Earnings per share (EPS) Profits after taxes / Number of shares of common stock outstanding Liquidity Ratios indicate whether a firm can cover its short term liabilities. 1 . Current ratio Current assets / Current liabilites 2. Quick ratio (acid test) (Current assets - inventory) / Current liabilities Leverage Ratios show how the amount of debt may effect the firm. 1. Total debt-to-assets ratio Total debt / Total assets 2. Debt-to-equity ratio Total debt / Total stockholders' equity 3 . Times-interest-earned or coverage ratio Operating income (EBIT) / Interest expenses Activity Ratios indicate how effective the firm's management uses its assets. 1 . Days of inventory 2. Inventory turnover 3. Average collection period Inventory / (Cost of goods sold / 365) Cost of goods sold / Inventory Accounts receivable / Average daily sales OR Accounts receivable / Total sales / 365 Market Value Ratios consider the value of the firm’s stock in the financial markets. 1. Dividend yield on common stock Annual dividends per share / Current stock price 2. Price-earnings ratio Current stock price / Earnings per share Working capital, Internal cash flow, and Free cash flow have been omited since the meaaurements are not ratios. Ratios are u and make valid comparisons. Large companies will have higher working capital than smaller firms. This means only that the fi necessarily better. Thus, you should not use this amount. The current ratio uses the same numbers and standardizes to make competitors or the industry means. he cross-sectional analysis compares different firms' financial t least one ratio from each category below and compare the analysis evaluates the firm's financial performance over time to you are expected to include a three-year time-series analysis for e most current data and cite your source and the effective date. hem and What They Mean What It Shows sales, assets, or owner's investments. Shows the percentage of revenues available to cover operating expenses and yield a profit. Higher is better and the trend should be upward . Shows the profitability of current operations without regard to interest charges and income taxes. Earnings before interest and taxes is commonly referred to as EBIT. Higher is better and the trend should be upward . Shows after-tax profits per dollar of sales. Higher is better and the trend should be upward . A measure of the return on total monetary investment in the enterprise. Interest is added to after-tax profits to form the numerator since total assets are financed by creditors as well as by stockholders . Higher is better and the trend should be upward . Shows the return stockholders are earning on their capital investment in the enterprise . A return in the 12–15% range is “average,” and the trend should be upward . This is one of the five performance targets in the BSG. Shows the earnings for each share of common stock outstanding . The trend should be upward, and the bigger the annual percentage gains, the better. This is one of the five performance targets in the BSG. Shows a firm’s ability to pay current liabilities using assets that can be converted to cash in the near term . Ratio should definitely be higher than 1.0; ratios of 2 or up to 3 are better. Ratios over three are too conservative for the liquid assets should be invested in long-term assets that generate financial returns. This is similar to the current ratio however inventory is omited from the numerator. This is important for companies that hold relatively high inventories due to slow turnover or expensive products like yachts or recreational vehicles which may be stored for over a year. In this case this ratio would be a better comparison to its competitors. Ratio should definitely be higher than 1.0; ratios of 2 or up to 3 are better. Ratios over three are too conservative for the liquid assets should be invested in long-term assets that generate financial returns. Measures the extent to which borrowed funds (both short-term loans and long-term debt) have been used to finance the firm’s operations. Companies use debt and equity to finance investment. Debt is less expensive to the company than equity. Thus, companies should carry enough debt to take advantage of the lesser cost but not too much debt to risk bankruptcy. Shows the balance between debt (funds borrowed both short term and long term) and the amount that stockholders have invested in the enterprise . The further the ratio is below 1.0, the greater the firm’s ability to borrow additional funds. Ratios above 1.0 and definitely above 2 .0 put creditors at greater risk, signal weaker balance sheet strength, and often result in lower credit ratings. Ratios below 0.5 are very conservative. Since debt is cheaper than equity the company may be paying too much for its capital investments. Measures the ability to pay annual interest charges . Lenders usually insist on a minimum ratio of 2 .0, but ratios progressively above 3 .0 signal progressively better creditworthiness . Measures inventory management efficiency. Fewer days of inventory is usually better. Measures the number of inventory turns per year. Higher is better. Indicates the average length of time the firm must wait after making a sale to receive cash payment . A shorter collection time is better. A measure of the return that shareholders receive in the form of dividends . A “typical” dividend yield is 2–3% . The dividend yield for fast-growth companies is often below 1% (maybe even 0); the dividend yield for slow-growth companies tends to be much higher. Slow growth firms have limited opportunities and thus disburse cash to their shareholders in dividends rather than capital gains or increases in share price. P-E ratios above 20 indicate strong investor confidence in a firm’s outlook and earnings growth; firms whose future earnings are at risk or likely to grow slowly typically have ratios below 12 . Stock price is one of the five performance targets in the BSG e meaaurements are not ratios. Ratios are used to standardize an smaller firms. This means only that the firm is bigger and not he same numbers and standardizes to make allow comparion with

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