Summary Of Petsmart's Financial Analysis

The following is a list of written analysis based on the financial statements of the publicly traded corporation PetSmart. Our focus in this second discussion of PetSmart will be on the items considering inventory methods used, value of inventory, purchase prices, expenditures, initial cost of merchandise, gross profit calculation, inventory turnover for year ended Feb, 2nd 2014 as well as comparing PetSmart’s ratios to industry averages which are currently 41% and 7.7 times. In hopes to make a good estimate of PetSmart’s over all worth to allow our organization to make concise and effectively controlled decisions.

From viewing of the financial statements it can be determined that PetSmart values inventory at the lower of either cost or market.

This takes the cost of goods sold in PetSmart and divides it by the industry average. This ratio conveys the number of times that inventory is sold during a particular period of business operation. The industry average is calculated by taking the beginning inventory and ending inventory then dividing the sum of both by two. ($740,302 + $679,090) / 2) = $709,696. The calculation of PetSmart’s inventory turnover ratio is ($4,222,542 / $709,696) = 5.95 times inventory has been turned over. As we can see 31% is lower than 41% and 5.95 is lower than 7.7. Thus we can determine rather efficiently that PetSmart’s productivity and efficiency is lower than industry standard. Although we can’t be absolutely certain about the reasons for this without additional time consuming research it can be assumed that one of the following area are in need of development in PetSmart. PetSmart is selling products too low, expenses to create/distribute also known as cost of goods sold are too high, the in some aspects are not focusing on most productive sales that create income and possibly purchasing too much inventory before it is actually

2nd 2014. Then we will discuss the methods of choice used for financial reporting processes. As we can see on the statement of cash flows there is a reported amount of $235,431 as the amount for amortization and depreciation for the period Feb. 2nd 2014 expense. PetSmart used a straight line method to depreciate their plant, property and equipment. These assets have a service life span of two the seven years. Feel free to reach out to me if you need additional copies of the financial statements other than the ones I have provided, as well as additional clarification if any of these calculations are confusing. I understand the importance of the need to make these important