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Sherwin-Williams Global leaders in paints & coatings. Company Background Sherwin Williams products include primers, paints, coatings, & floorcoverings, and related products to professional, industrial, commercial, and retail customers primarily in North and South America and Europe. They are the global leaders in paints and coatings. By the end of 2020, Sherwin Williams had operations in over 120 countries. Balance Sheet Total Assets = $20,401,600,000 ● ● ● ● Uses LIFO inventory cost method Intangible assets totalling at $4,471,200,000 Natural resources include energy supplies (including oil and natural gas) and raw materials (including titanium dioxide and petrochemical feedstock sources, such as propylene and ethylene) Uses straight line depreciation method Total Liabilities = $16,790,800,000 ● N Total Stockholders’ Equity = $3,610,800,000 The balance sheet for this company is balanced, which tells me that the company has a well-kept record of every transaction, recording every transaction in at least two places. Income Statement Net Sales/Revenue = $18,361,700,000 COGS = $9,679,100,000 Gross Profit/Margin = $8,682,600,000 Gross Profit/Margin Ratio = $8,682,600,000 / $18,361,700,000 = .47 Net Income/Loss = $2,030,400,000 The information gathered from the income statement tells me that this company makes avgross profit of .47 cents for every dollar gained in sales. Statement of Cash Flows Net cash from Operating Activities = $3,408,600,000 Net cash from Investing Activities = ($322,400,000) Net cash from Financing Activities = ($3,020,100,000) Effect of exchange rate changes on cash = ($1,300,000) Net Change in Cash = $64,800,000 The positive net change in cash tells me that this company has a gain of funds over time after paying debts. A positive, negative, negative on a statement of cash flows tells me that this company is able to fully fund their operations, they are investing their money back in themselves (like in capital expenditures and other investments), and that the company is paying out capital (like retirement, paying off long-term debt, and/or making dividend payments to stockholders). Financial Ratios ROI = $2,030,400,000 / (($20,401,600,000 + $20,496,200,000) / 2) = 9.93% ROE = $2,030,400,000 / (($3,610,800,000 + $4,123,300,000) / 2) = 52.51% Working Capital = $4,591,400,000 – $4,594,400,000 = -$3,000,000 Current Ratio = $4,591,400,000 / $4,594,400,000 = 1.00 (.9993) EPS = $2,030,400,000 / 91,942,623 = 22.08 or $2,030,400,000 / 90,425,861 = 22.45 The normal range for an ROI for a manufacturing company is between 8% – 12% and Sherwin williams ROI is within that range. Its ROE tells me that this company has a high return, meaning that for every $1 of shareholder’s equity the company generated about 52.51 cents ($0.5251) in profit. However, this high ROE could also indicate a higher portion of debt. The working capital tells me that the company may have incurred an increase in accounts payable as a result of a large purchase of products and services from its vendors. The current ratio tells me that the company can just about pay off its current debts. The EPS in 2018 was 11.92, in 2019 was 16.79, and in 2020 it was 22.45. This shows me that the company’s EPS has a positive consistent growth, which means that this company is steadily growing a stronger profit growth. Notes to the Financial Statements ● This company had a lead pigment and lead-based paint litigations in several counties and entities. ● After 20 years of litigations, Sherwin Williams and two other defendants reach an agreement principle with the plaintiffs to resolve the litigation. The agreement provides that, in full and final satisfaction of any and all claims of the plaintiffs, the Company and the other two defendants collectively shall pay a total of $305.0 million. ● An example of a lawsuit involving Sherwin Williams is the plaintiff in Thomas v. Lead industries Associations, et al., resulting Wisconsin Court of Appeals affirmed the final judgment in favor of the Company and other defendants. Other Information in Annual Report ● In the opinion of the independent registered Public Accounting firm, the consolidated financial statements presented fairly and conformed with U.S. GAAP. ● They mentioned that there were long and short term accruals related of environmental related activities, and the biggest one was located in Gibbsboro, New Jersey. They disclosed that they had a difficult time auditing this because it required complex judgment due to challenges of identities of future remedies for reasonably estimable and probable losses. ● In my opinion, I think that the investors should invest in this company. This company presents its financial statements in accordance with U.S. GAAP, they pay off their long-term debts, they have a positive net cash flow able to cover their cost by almost 1.5, and they pay their shareholders’ dividends and their employees retirement and pensions.
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