Financial taxonomy of non-governmental sports organizations
Question One
Big 5 largely depend on its established brand to sell its product in areas across the world. The company already established a name after numerous years of being in the business and thus utilizes this to gain entry into more markets. Its business strategy is also based on selling a wide range of products to different market segments. Additionally, the company has been increasing the number of retail stores present in the process expanding its opportunities into new areas across the globe. Currently the store has more than 390 outlets and is in the process of establishing more outlets across the world. The company has also come up with various incentives to ensure that both the new and regular customers come to this organization. one such incentive is the competitive and recreational goods for customers (Bednarik 256). Big 5 have managed to acquire several different mergers and acquisitions thus increasing the competitive advantage of the company in the market. It is widely expected that the financial records will show more expenditure to show for the incoming projects and later on the financial reports to show the income that comes from the different new projects
Question Two
Big 5 recent financial performance has been improving for the past four. This year the company has introduced inventory management strategies which resulted in increased acquisition of new products. The company also took several measures to cushion its client from feeling the full effects of recession. The amount present was scaled down to allow the company to operate effectively. The number of dividend to be shared among individuals was also determined. Dick Sporting Company is way above Big five. Its annual amount of cash is in millions. Cash flow from operating activities has dwindled over the years to low values. In other words the amount of cash in operating activities has been decreased. The amount of cash in investing activities have increased meaning the company is putting the best feat forward in coming up with new opening up new market places. Finally, the cash equivalents at the end of the years are nearly the same. Although Big 5 may not be doing as well as any other restaurant, it is important to note that its cash flow activities are becoming more stable because the more money is being invested.
Question Three
The new credit agreement with Wells Fargo is much more likely to assist the company as compared to the credit management with CIT group/ Business. The amount of credit to be borrowed from the credit services is high and there are several options that allow the company to ask for loan from different stakeholders in the market. The new credit system is much high and it would therefore mean that the company will be able to borrow money and run all its activities. The company did not go for public bonds since the credit services were the best approach for providing money to the company without any restriction on interest rates. several important restrictions were present (Brealey 45). The company was limited in several aspects including its ability to dispose assets, guarantee obligations, making of advance loans or paying of dividends in their market. Big five would agree with the above limitations because the company is investing more in the credit services and it serves to benefit more if the number of customers going to the company
Question Four
The company stands to gain more if it leases the two services to other companies since there is a high probability that the company would go for losses if it choose to start lease out their houses. Additionally, the amount of lease agreements would vary per month sometimes decreasing and sometime rising. However, when the company’s houses are leased, it is more likely that the price will remain stable throughout time and the company will gain more money from the lease agreement (Bednarik 256). If the company decides to use some of the company’s house then they would not be interested in making more money since no charge will be applied meaning no amount of money will be collected. Leasing of a product is accompanied with payment and monthly interest for the company of interest (Brealey 45).
Question Five
Operating leases are important for the company because they do not own some of the services and products. Thus instead of going forth in the market as a solo entity to completely buy off the product or services, an operating lease can be provided at an alternate cheaper prices. In the previous year the company scored some huge points when it came to capital leases. The company also scored some valuable points when it came to leasing houses during holidays. If the additional liability in the company had been classified as a capital lease then the company would have had to pay for the for certain services that are never present in the company. if capital leases were converted to a form of liability it means that the company would have to fork out more money in form of debt to pay for the increased charges (Brealey 45). Therefore, any charge affects the equity –debt loan
Works Cited
Bednarik, Jakob, et al. “Financial taxonomy of non-governmental sports organizations.” Kineziologija 45.2 (2013): 241-251.
Brealey, Richard A., et al. Principles of corporate finance. Tata McGraw-Hill Education, 2012.