Pro Forma Financial Analysis Paper

After preparing the Pro Forma Financial Statements for the company Bodie Industrial Supply Inc. (or BIS), I have calculated the pro forma ratios, and the sustainable growth rate. So, I can analyze the data using this information from 2006 to 2007. As we can tell by BIS’s Profitability, the gross margin is forecasted to stay at 28.5%. On the other hand, the industry average is 32.1%. Also, the company’s Net Profit margin is 2.648%, which shows a drop by 0.152. However, the industry average is 3%. BIS’s Return on Equity is estimated to drop from 71% to 47.6%, and is projected to be higher than the industry average of 14.4%. So, it is evident that Bodie Industrial Supply Inc.’s profitability is below the industry average, which does not look good

The company’s Debt to Equity was 11.80 in 2006, even though it is projected to be 8.7. This means that the company is forecasted to have less debt in the future than it had in previous years. As well, the Net Worth to Total Assets was 8% in 2006, and is estimated to increase by 2%. This would result in a total of 10%, which is much lower compared to the industry average of 48%. The Times Interest Earned Ratio, is estimated to be 3, since it is projected to increase by 0.3. This is also lower than the industry average of 3.6. Therefore, Bodie Industrial Supply Inc. is forecasted to have an increase in their stability. However, the company does have more debt than the industry

was also analyzed. This includes Character, Capacity to Repay, as well as Collateral and Conditions. Based on the company’s Character, it is easy to determine the company’s strengths and weaknesses. The company seems to be able to increase their sales, and have also projected to have lower debt. These two strengths are crucial since it is evident that an increase in sales means that BIS will have more cash, and having lower debt means that they owe less money. The weaknesses that BIS faces include their poor liquidity. This obviously does not look good for the company due to the fact that they have low Accounts payable days, which means that they need to be more liquid in order to pay off their debts, as their debts will be due sooner. Based on BIS’s conditions, their threats and opportunities can be determined. The company has opportunities to increase their sales since they have a forecasted increase in sales, which will help them generate cash. BIS’s biggest threat is that they may not be able to pay off their debts in time, with their Accounts payable days dropping to 60 days. Moreover, based on their capacity to repay, it is evident that their forecasted liquidity is not in a good state, which is not good as their Accounts Payable is much lower than before. On top of that, their liquidity has been dropping from the year 2004, which does not bode well with this company. Looking at BIS’s collateral, it is