Ceres Gardening Essay
When developing my forecast I looked at the previous years and the growth that the company experienced to make my assumptions. For example, cash seemed to be growing at a steady pace until 2006 when it declined so I made an assumption that it would continue growing by about 7%. The growth of the overall industry had been between 8 and 10% a year. The reason I chose more reasonable numbers for my assumptions was because problems were occurring when stores weren’t adequately stocking their inventory at peak times. They were also asking for extensions for making payments after the sales had already been made.
To better understand and measure how effectively the company is using its assets and how efficiently the firm manages its operations I decided to calculate the profit margin for 2006 at 3.6% which tells me they are only making 3 cents of income for each dollar of sales. In my opinion the higher this number is the better because 3 cents to the dollar is not a lot for income and the company could be having some financial troubles that are not as obvious. Using my projections for 2009 that number would increase dramatically to a profit margin of 39.7%. Return on Assets for 2006 is 5.45% and increased to 9.71% in 2009. Another very important calculation is the total asset turnover, so for every dollar in assets they made 1.51 is sales this number unlike the others,