Partial Bombay Analysis

Retained earnings are company earnings that are not paid out as dividends but instead reinvested in the core business or used to pay off debt. They are increased by net income and decreased by net loss and dividends for the year. This basically means that money earned (net income) will add to retained earnings but if there is a net loss there will be no earnings to retain. Also if that money is paid out to dividends it is not considered retained. Bombay’s retained earnings dropped during the last year because their net income dropped drastically. It is hard to retain earnings when, as a company, your net income is -$46,731.

In 2002 Bombay Company eliminated their program of providing loans to officers to purchase stock for one simple reason. It became illegal. When the Sarbanes Oxley Act of 2002 was passed it stipulated that a CEO, CFO or any other director or officer of the company cannot borrow any money from the company directly or indirectly.

Common shares in treasury can be named as assets since they are highly marketable. However, the total amount of the treasure shares is limited by the dividends earned in reference to the EPS calculated using the common shares and the adjusted NI.

The two major strategies for companies in mature markets are image/prestige and saturate/economy. Bombay being in a very mature market seems to be following the image/prestige strategy because they are in a select market, have higher prices, attempt to produce furniture and products of an excellent quality, and because they have a limited and premium production capacity. Basically, they are trying to make nice furniture in a niche of high revenue quality furniture and accessory production. They are not making a ton of cheap furniture, but rather going for quality over quantity.

Bombay cannot compete with Wal-Mart. They are targeting different customers and attempting to meet different needs. They are not in the same business. This makes this competition not even an issue. They are not even comparable in this fashion. Wal-Mart is much more about product moving in numbers than is Bombay. The quality of product is also polar in terms of Bombay’s company and production goals. However, Ethan Allen Interiors is a more likely comparison to Bombay. They produce products of more similar range in quality and cost. They are essentially in a more similar market and can be considered a more viable