Bnl Store Financial Analysis
Autor: shamsudin • September 8, 2016 • Case Study • 653 Words (3 Pages) • 768 Views
BNL STORES
BNL was an established Midwestern retailer store from last 40 years. Back to some years BNL adapted a series of new business strategies, like opening new supercentre stores that carried a greater selection of durable goods and phasing out the traditional discount stores. This strategy adaptation showed that BNL wants to move from higher volume sales having lower price sales to lower volume sales but with higher prices sales in order to increase revenues.
In another strategy in which BNL started offering store credit to its customers in order to entice customers to purchase these more expensive items. Store manager were paid an annual bonus based on net income for their respective store and this strategy adaptation caused the increase in revenue initially but the receivable collection period increased.
The credit sales strategy caused the company to become out of cash and the cash conversion cycle is slowdown by increasing the receivable collection days, payable outstanding days and decreasing inventory turnover.
This lacking cash conversion cycle entries. BNL to borrow more debt year over year that has increased the debt over equity ratio up to (8.5) in year 2010 in order to show the increasing cash and cash equivalents and pay dividends.
Though the company’s profit margins are in decreasing pattern from 3.4% in 2005 to (11.8) %. In 2010 however the company is paying dividend every year with the ratio of 55% in 2008 and 2.1% in 2010 from borrowing as in 2010. BNL has borne the net loss of (1418678) thousands. This decreasing net income and finally the negative in the year 2010 is due to the increasing ratio of cost of goods sold as percentage of sales (60% of sales in 2009 and 73% in 2010) and increasing S.G.A expenses due to the bonus it pays to its employees on increased net income and increased borrowing cost . This has decreased the firm’s return on equity and return on assets.
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