1964-1965 Financial Statement Analysis

Agribusiness

By: Emily Bell, Marketing Manager  |  email

In preparing for this edition, we came across some of Dan Gardinerís files and reports, finding one that summarized the results of his clients from May 1964 to May 1965 closes. We thought you might enjoy reading what the averages were of what he was seeing in his audits. Here are excerpts and stats from that analysis. Cut from Dan’s opening letter:  "Though many of your coops are financially sound and very efficient in operation, we doubt that there is a single coop that is excellent in every respect when compared to other operations. The statistical information provided will, we hope, give an idea of the averages of various cooperatives. The common problems of coops which the information will point out are summarized below: I. Insufficient net savings caused by

A) Inadequate margins because of

1. Insufficient mark-up

2. Excess shrink

3. Not providing for obsolescence

4. Price cutting and price wars

B) Excessive operating costs caused by

1. Unproductive use of employeeís time

2. Insufficient sales or volume

3. Overinvestment in fixed assets

4. Extension of credit

5. Lack of coordination or planning

6. Unproductive expenditures on sales promotion

7. Poor judgment

II. Distorted financial position due to:

A) Under capitalization

B) Unsound use of capital reflected in

1. Excessive capitalization

2. Heavy inventories, poor turnover, etc.

3. Excessive investment in fixed assets

Though averages and ratios are effective tools to use in analyzing financial statements, they cannot provide all the information that is needed. We do think the information will be useful to you when you study your own financial statements. Financial ratios vary with seasonal changes in business activities. When sales are at a peak, receivables, inventories, and liabilities are high. Ratios therefore, will be effected. The drive at year end to lower receivables and pay all bills results in "window dressing". This procedure distorts year end ratios." Financial Analysis chart   For a copy of Danís entire Financial Statement Analysis, please contact Emily Bell at [email protected]
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