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After graduating from college in May 2018, Ryan Crews started his career in finance at W&T Corporation, a small- to medium-sized warehouse distributor in Nashville, Tennessee. The company was founded by David Winston and Colin Tabor in 2005, after they had worked together in management at Walmart. Although Crews had an offer from Sams Club, he became excited about the opportunity with W&T.

For W&T, 2017 turned out to be a good financial year. But in 2018, the company experienced a 5.3 percent sales reduction, where sales declined from $5.7 million to $5.4 million. The downturn then led to other financial problems, including a 50 percent reduction in the companys stock price. The share price went from $36 per share at the end of 2017 to $18 per share at the end of 2018!

David Winston and Colin Tabor want to understand what may have happened.

Financial information for W&T for both years is shown below, where all the numbers, except for per-share data, are shown in thousands.

1. Using what you have learned in this chapter and Chapter 3, prepare a financial analysis of W&T, comparing the firms financial performance between the two years.

2. What conclusions can you make from your analysis?

3. What recommendations would you make to management?

W&T Corporation Income Statements 2017 2018 Sales $ 5,700 $ 5,400 Cost of goods sold (3,700) (3,600) Gross profits $ 2,000 $ 1,800 Operating expenses: Selling and G&A expenses $ (820) $ (780) Depreciation expenses (340) (500) Total operating expenses $ (1,160) $ (1,280) Operating profits $ 840 $ 520 Interest expense (200) (275) Earnings before taxes (taxable income) 640 245 Income taxes (230) (65) Net Income $ 410 $ 180 Additional information: 150 150 Number of common shares outstanding Dividends paid to stockholders $ 120 $ 120 Market price per share W&T Corporation Balance Sheets 2017 2017 2018 2018 Assets Cash 300 $ 495 Accounts receivable 915 Inventories 700 600 125 780 Other current assets 160 Total current assets $ 1,725 $ 2,350 Gross fixed assets $ 4,650 $ 4,950 Accumulated depreciation (1,700) (2,200) Net fixed assets $ 2,950 $ 2,750 Total assets $ 4,675 $ 5,100 Liabilities (Debt) and Equity Accounts payable 400 $ 640 Short-term notes payable 250 300 Total current liabilities $ 650 $ 940 Long-term debt 1,250 1,325 Total liabilities $ 1,900 $ 2,265 Common equity: Other current assets 125 160 Total current assets A $ 1,725 $ 2,350 Gross fixed assets $ 4,650 $ 4,950 Accumulated depreciation (1,700) (2,200) Net fixed assets $ 2,950 $ 2,750 Total assets $ 4,675 $ 5,100 Liabilities (Debt) and Equity Accounts payable 400 $ 640 Short-term notes payable 250 300 Total current liabilities $ 650 940 Long-term debt 1,250 1,325 Total liabilities $ 1,900 $ 2,265 Common equity: Common stock $ 1,100 $ 1,100 Retained earnings 1,675 1,735 Total common equity A 2,775 $ 2,835 Total liabilities and equity $ 4,675 $ 5,100 W&T Corporation Income Statements 2017 2018 Sales $ 5,700 $ 5,400 Cost of goods sold (3,700) (3,600) Gross profits $ 2,000 $ 1,800 Operating expenses: Selling and G&A expenses $ (820) $ (780) Depreciation expenses (340) (500) Total operating expenses $ (1,160) $ (1,280) Operating profits $ 840 $ 520 Interest expense (200) (275) Earnings before taxes (taxable income) 640 245 Income taxes (230) (65) Net Income $ 410 $ 180 Additional information: 150 150 Number of common shares outstanding Dividends paid to stockholders $ 120 $ 120 Market price per share W&T Corporation Balance Sheets 2017 2017 2018 2018 Assets Cash 300 $ 495 Accounts receivable 915 Inventories 700 600 125 780 Other current assets 160 Total current assets $ 1,725 $ 2,350 Gross fixed assets $ 4,650 $ 4,950 Accumulated depreciation (1,700) (2,200) Net fixed assets $ 2,950 $ 2,750 Total assets $ 4,675 $ 5,100 Liabilities (Debt) and Equity Accounts payable 400 $ 640 Short-term notes payable 250 300 Total current liabilities $ 650 $ 940 Long-term debt 1,250 1,325 Total liabilities $ 1,900 $ 2,265 Common equity: Other current assets 125 160 Total current assets A $ 1,725 $ 2,350 Gross fixed assets $ 4,650 $ 4,950 Accumulated depreciation (1,700) (2,200) Net fixed assets $ 2,950 $ 2,750 Total assets $ 4,675 $ 5,100 Liabilities (Debt) and Equity Accounts payable 400 $ 640 Short-term notes payable 250 300 Total current liabilities $ 650 940 Long-term debt 1,250 1,325 Total liabilities $ 1,900 $ 2,265 Common equity: Common stock $ 1,100 $ 1,100 Retained earnings 1,675 1,735 Total common equity A 2,775 $ 2,835 Total liabilities and equity $ 4,675 $ 5,100