Bodie Industrial Financial Analysis

Date : 28.11.2017

Name : Serdar Göçmez

Professor : Ebru Reis

Subject : Bodie Industrial Financial Analysis

Bodie Industrial Supply Inc. (BIS) is a local company located in Barron, Ontario, acquired by Liz Bodie in 2003. BIS is a distributor of wide and quality range of tools, parts and equipment in a large and developing industrial area. After acquisition of Liz Bodie, company keep improving with her experience in market. However, company is facing competition that is becoming strong. Online-based companies and megastores becomes main competitors for BIS.  

When we analyze BIS’s operational performance after acquisition, an improvement can be found. Despite increase of its inventory, company turns its inventory into sales 117 days in 2006 that was 175 days in 2004 (Table 4 page 5). However, last year an increase occurred in average collection period from 46 to 60 days that is 8 days more than industry average (Table 4 page 5). It can be assessable as an alert for the company.

On the other hand, profitability of the company is in improvement. Operating and Net Profit Margin ratios shows it clearly that company made an important progress in 2006 (Table 4 page 5). Ratios increased from 0,6% to 4,4% and from -1,2% to 2,8% respectively. Because, instead of similar portion of cost of goods sold (around 70% of sales), company managed to decrease its operating expenses portion from 34% of sales to 24% (Table 1 page 3).

However, desire of decreasing payable days to 60 days and increasing sales amount will result with a debt necessity for the company. Projections shows that beside an increase in assets, a decrease in account payables can be possible with an increasing line of credit (Table 2 page 4).  When we make projections with $2 million sales for next two years, necessity of debt amount will be decrease (Table 5 and 6, pages 6 and 7).

BIS’s liquidity ratios also close to industry and projected ratios are improving (Table 4 page 4).  Without a decrease in sales, company can afford possible loans will be lend. However as mentioned before, warehouse loan have to be supported with line of credit, because of possible decrease in account payable days.