Introduction
We are the Best Co is one of the leading spanish companies, which manufactures computer screens.The company has 4 warehouses across the country and the company has almost 18% of the market share.Its competitors are giants in the industry and their origin is not spanish, as they are multinational companies.
Best co is working since many years in the country.Its major customers are large scale distributors who are in the business of distributing these screens to many computer manufacturing companies.
The company’s product line is not vast since it is manufacturing only screens and in the screens there are five sizes.The components they use to make a screen are 10 of which 6 are commonly used across all sizes and the other require a bit of customization
The company’s main customers are three major distributors from which the company is generating almost 10 million euros every year.There is also a potential customer from whom the company can make 3 to 4 millions yearly, however the customer is not ready to purchase from Best Co.The other highlights and business strategies will be discussed later in the study.
Financial Analysis
If we see towards the financial analysis of We are the Best co, we have limited financial data through which we have calculated the variances in the working capital and also made the common size income statement.
Working capital Management
If we see the balance of cash, which has been considered as the Working capital in the case, then we can see that it is declining year by year.In the first year, it declined by 20% then 13% and then increased by 29%, which shows the company’s inability to manage its WC effectively. (See Exhibit 1)
Common Size Partial Income Statement
As we move forward towards the common size partial income statement, we will get the income statement.This income statement has been made by the help of the partial income statement, which was been given in the case.
Purchasing Cost
As we see that the major area of cost is pertaining to the purchases of components, which are 50% in the first year then 55% in the second year and after that they increased to 60% in the last year. This increasing cost of purchases is not allowing the profit to grow. Although sales are still growing at a slower pace however,the increasing cost is not allowing the Gross profit to increase. (See Exhibit 2)
Transportation Cost
The transportation cost is growing year by year, which is also decreasing the profitability of the company.The company should make sure that it is achieving economies of scale in transportation by avoiding more orders in a year and also the company should make sure that it is ordering its shipments in bulk amount in order to reduce its transportation cost. (See Exhibit 2)
Salaries
(See Exhibit 2)
Gross profit
The gross profit of the company is declining year by year because of the increasing cost which the company is bearing.The company should control these excessive costs in order to stay competent and to avoid losses. (See Exhibit 2)
Product Line Analysis
The company manufactures computer screens in different sizes, as it is analyzed that the most competent and most demanded size is 15 inch and 18 inches screens. This indicates that the other products are manufactured however, their demand in the market is quite low, which is why they are not producing much revenue. It also indicates poor marketing initiatives, which the company is taking.(See Exhibit 3).......................
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