Garner Men's Wear is a relatively small, independent men's wear retailer located in Oshawa, Ontario, that...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Garner Men's Wear is a relatively small, independent men's wear retailer located in Oshawa, Ontario, that has been operating for more than 30 years. The owner, Adam Garner, previously worked for 10 years at Tip Top Tailor, a national chain of men's formal clothing, before starting his own store. Although the first few years were difficult as the business was getting established, Adam was eventually able to develop the business and provide superior ser- vice while offering high-quality men's clothing at competitive prices. His target market is made up of middle-aged executives and professionals, most of whom he knows on a first-name basis. Adam has always felt that if he takes care of his best customers, the financial part of the business will take care of itself. He is comfortable with this phi- losophy because he really does not enjoy all the bookwork that is part of running a business. Recently, however, he has become concerned about the performance of the business. One of his concerns includes the financial aspects of the business. He seems to always have lots of customers, but when he gets his financial statements from his accountant about two months after the year-end, he is surprised and disappointed to find that the net income of the business has dropped to $10,000 and there is no cash in the business bank account. Assume that you have been called in to evaluate Adam's business. He provides you with the following financial statements for the last two years: Sales Cost of Goods Sold Gross Profit Expenses Net Profit Garner Men's Wear Ltd. Income Statement 2019 $750,000 2020 $720,000 500,000 490,000 250,000 230,000 200,000 220,000 $ 50,000 $ 10,000 Questions 1. Comment on the financial management practices of Adam Garner in managing Garner Men's Wear. 2. Calculate and discuss the significance of each of the following for Garner Men's Wear: a. Current ratio b. Inventory turnover c. Debt ratio d. Return on investment e. Return on sales 3. How many days are there in this company's business cycle? (That is, how long is it taking to convert cash spent back to cash available?) 4. Where did the $10,000 cash from the 2019 statement go in 2020, even though the business made $10,000 income during 2020? Garner Men's Wear is a relatively small, independent men's wear retailer located in Oshawa, Ontario, that has been operating for more than 30 years. The owner, Adam Garner, previously worked for 10 years at Tip Top Tailor, a national chain of men's formal clothing, before starting his own store. Although the first few years were difficult as the business was getting established, Adam was eventually able to develop the business and provide superior ser- vice while offering high-quality men's clothing at competitive prices. His target market is made up of middle-aged executives and professionals, most of whom he knows on a first-name basis. Adam has always felt that if he takes care of his best customers, the financial part of the business will take care of itself. He is comfortable with this phi- losophy because he really does not enjoy all the bookwork that is part of running a business. Recently, however, he has become concerned about the performance of the business. One of his concerns includes the financial aspects of the business. He seems to always have lots of customers, but when he gets his financial statements from his accountant about two months after the year-end, he is surprised and disappointed to find that the net income of the business has dropped to $10,000 and there is no cash in the business bank account. Assume that you have been called in to evaluate Adam's business. He provides you with the following financial statements for the last two years: Sales Cost of Goods Sold Gross Profit Expenses Net Profit Garner Men's Wear Ltd. Income Statement 2019 $750,000 2020 $720,000 500,000 490,000 250,000 230,000 200,000 220,000 $ 50,000 $ 10,000 Questions 1. Comment on the financial management practices of Adam Garner in managing Garner Men's Wear. 2. Calculate and discuss the significance of each of the following for Garner Men's Wear: a. Current ratio b. Inventory turnover c. Debt ratio d. Return on investment e. Return on sales 3. How many days are there in this company's business cycle? (That is, how long is it taking to convert cash spent back to cash available?) 4. Where did the $10,000 cash from the 2019 statement go in 2020, even though the business made $10,000 income during 2020?
Expert Answer:
Answer rating: 100% (QA)
1 Comment on the financial management practices of Adam Garner in managing Garner Mens Wear Adam Garners focus on providing superior service and highquality clothing to his target market is commendabl... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Case Study 2 (questions at the end of the document) By Colleen Haight Summer 2011, Stanford Social Innovation Review, Informing and Inspiring leaders of social change Jesus Lopez Hernandez picks ripe...
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Greenback Sporting, a retailer of outdoor wear and sporting equipment, is investigating an opportunity to purchase Active Lifestyle Inc. An acquisition is expected to lower overhead costs, improve...
-
Defendants were indicted in the United States for conspiring to ship, and for shipping, parts for forklifts to Iran in violation of the Iranian Transactions Regulations (ITR) and "with knowledge or...
-
Consumers Union is a nonprofit organization that provides information and counsel on consumer goods and services. A major part of its function is the testing of different brands of consumer products...
-
What is the purpose of an insurance policy?
-
The Kalo Fertilizer Company makes a fertilizer using two chemicals that provide nitrogen, phosphate, and potassium. A pound of ingredient 1 contributes 10 ounces of nitrogen and 6 ounces of...
-
It may be that Bruce Smith needs to contemplate whether he is subject to behavioral biases as he evaluates the terms. What are some concepts from behavioral finance that Bruce Smith should address...
-
At the beginning of Year 1, your auto-insurance premium for the next year is $300. If you have zero accidents in a year, your premium for the next year drops 10 percent; if you have one accident in a...
-
It is found that a saturated solution of sodium chloride in water boils under atmospheric pressure at 109C. Under an absolute pressure of 25.4 kPa, water boils at 65.6C and saturated sodium chloride...
-
Evaluating Firm Profitability The following financial information is taken from the annual reports of the Smith Company and the Wesson Company: Smith Wesson Net income $20,000 $180,000 Net sales...
-
A loan was taken out on January 1, 2018 in the amount of $20,000. During the year payments were made to pay back the loan. The payments included $2,000 in interest and $1,230 in principal. What is...
-
Bhavna, 16, is claimed as a dependent on her parents' tax return. In 2023, Bhavna earned wages of $6,748. Bhavna had investment income of $746 in 2023. Bhavna had no deductible expenses in 2023 and...
-
On December 5, a company accepts a $4,850, 90 day, 5% note from a customer. What adjusting journal entry will the company make on December 31 to accrue the interest due at the financial statement...
-
If there are 445,902 households tuned to "American Idol" on WLS in New Orleans, and there are 3,400,000 households in the market equipped with television, and 675,000 sets in use, what is its...
-
Bauer Corporation anticipates the following sales revenue over a five-month period: Bauer Corporation's sales are 50 % cash and 50% credit. The Bauer Corporation's collection history indicates that...
-
The overall reaction and equilibrium constant value for a hydrogenoxygen fuel cell at 298 K is 2H 2 (g) + O 2 (g) 2H 2 O(l) K = 1.28 10 83 a. Calculate E cell and G 8 at 298 K for the fuel cell...
-
Why do auditors prepare management letters?
-
The auditor determines that each of the following objectives will be part of your audit of Farmington Inc: 1. Establish that the client has rights to the recorded inventories. 2. Establish the...
-
Explain how gathering physical evidence by inspecting a client's tangible assets assists in the audit of the completeness and existence assertions.
-
Technical analysis looks at the demand and supply for securities based on trading volumes and price studies. Charting is a common method used to identify and project price trends in a security. A...
-
Consider a company that earned \($4.00\) per share last year and paid a dividend of \($1.00.\) The firm has maintained a consistent payout ratio over the years and analysts expect this to continue....
-
A cyclical company tends to a. have earnings that track the overall economy. b. have a high price-to-earnings ratio. c. have less volatile earnings than the overall market.
Study smarter with the SolutionInn App