Financial Statement Analysis for TOMS - Case Study Example

Financial ment Analysis for TOMS Financial ment Analysis for TOMS Introduction Focus is an important aspect of any business or company. It is mainly related to the financial aspect where a company is able to use its past financial trends to determine the current operations as well as predict the likely occurrences in the future. One of such companies is TOMS whose operations are found within the fashion industry. In particular, the company deals in foot and eye wear. In order for the company to plan ahead and lay better ideas for the future, this will make it necessary to conduct a financial statement analysis. It will be a step towards finding out what worked well for the company and what is likely to be the trend in the future. In addition, the management of the company uses this analysis tools to correct the mistakes that have been performed before. With this, the profits of any business are likely to be increased as the business becomes more stable. In this analysis, a determination will be made as to whether the strategic marketing employed by TOMS will mitigate the need by the company to produce their goods in line with the highest products available in the market or to continue the performance of their charitable works in the most effective manner. TOMS Shoe Company Background of the firm, industry, TOMS is also commonly known as the TOMS shoes. It is a company that was developed to make profits within the styles and fashion industry. The shoe company, which is also a canvas shoe empire, is based in Playa Del Rey in California. Nonetheless, the company also operates a subsidiary for non profit. This is commonly referred to as the Friends of Toms. TOMS Company was founded by Blake Mycoskie in the year 2006. He was an entrepreneur who came from Arlington in Texas. It designs shoes and also sells them. They base these activities on the designs of Argentine Alpargata although they also focus on a variety of eyewear. Toms shoes was also set up as a social enterprise with the intention of promoting a new solution to the social problem that mainly afflicts the poor. For this reason, TOMS Company also acts upon charitable activities. This act of goodwill takes place in the form of giving a pair of shoe to an impoverished child when a single pair is sold at the store. In a similar way, when the company sells a pair of eyewear part of the profit that they get is used to restore and to save the eyesight for most of the people who live in developed worlds (Watkins, 2011). Toms uses a unique form of marketing to advertise and sell its products. The most common types of marketing strategies employed by the Toms Company include high profile events, fashion shows, the use of social media, university campus marketing and the development of temporary pop up stores. The different products have been created in such a way that enables them to fit with varied environmental ideas and ideals as well. They include the creation of shoes that are compliant with the standards of vegan product restrictions along their production lines. The most popular lines and ideals that are used by the company, which have led to its becoming involved in advertising campaigns across different companies include the commercial with AT & T. This filmed one of the shoes that are produced by Toms in Uruguay (Short, 2011). Economy and outlook for the future For a long time, TOMS has conducted a financial analysis. Through this, the top management is able to review and analyze the financial statements of the company. These decisions assist them in the making of better financial decisions. The constructions of statements by the company makes use of the income statements, balance sheets, the statements of retained earnings and the statements of cash outflows. The current income statement of the company appears as follows Income Statement Revenue $9.8 Gross Profit $15.2 Operating Income $14.3 Net Income $17.8 Diluted EPS $12.0 From the financial analysis performed by the company, it has been realized that it is one of the companies that bears a low credit rating. This is because of the fact that these businesses possess a lower projected risk of delinquency while the risk of failure has been found to be moderate to low. Toms appears to have a promising future with its buy one give one policy sets Toms apart from the other canvas shoe makers as much as those that are engaged in canvas styling. Short term liquidity of the firm The fact that TOMS has shown a positive response towards other companies with which they can collaborate and offers the one on one movement is thrilling as it is capable of producing significant growth. However, it also presents a complex situation in relation to the supply chain. Within a vibrant and growing commercial business environment, it is the responsibility of all stakeholders to make certain that there exists a large global giving program that ensures that all the donated shoes are able to reach the appropriate and recommended people. Operating Efficiency of the firm One of the aspects that has made Toms company able to operate efficiently for a long time is that they are also concerned about the plight of the poor as well. In this respect, at Toms, there exists the One on One model, which has inspired many other different companies to adopt similar approaches and concepts. For instance, the Social business of the Ruby Cup applies the model of Buy one give one for their venture that includes the sale of every menstrual cup. In this case, one of them is offered to a girl in Kenya. In the recent past there has been an indication that Bains Capital was interested in buying Toms. Despite this, the company would still continue to give away shoes. It is said that Toms has agreed to sell a half of what it owns to the Bain Capital, which is a private an equity giant. In the deal, the 8 year old footwear brand has been valued at approximately $625 million. This is a little bit higher than the value given for Quicksilver. It is as a result of this that The Toms Company has had a huge influence on a number of companies (Watkins, 2011). Toms has also selected the GT Nexus to provide its cloud computing services. This mainly includes the platform for cloud supply chain technology. It will give support for global sourcing and other import operations to assist the footwear and eye company that is rapidly growing. Since 2013, TOMS has used this platform to manage its multiple distribution channels. They include the retail consumers, the online and the company’s program that involves giving partners to offer support for its one for one model. This ensures that a child who is in need is able to receive a new pair of shoe fort each pair that is purchased. Capital structure of the firm The design that is used at TOMS shoes is largely that of a for-profit enterprise that is managed privately. The company lacks an official division for corporate responsibility or a particular staff member who is dedicated to this sole purpose. As an alternative, the CEO at the company refers to himself as the Chief Shoe Giver. This implies that there is a priority given by the company towards social responsibility. It is these practices that form the key to the main business model. . With this structure, it is evident that Toms Company through its numerous operations, is involved in transactions that ensure the possibility of validation of both a vision and a huge payday. It focuses on the fact that the founder of the company found that for focus and bottom line focus did not have to conflict with the for good (Oakland, 2010). Nonetheless, despite the commitment by the firm towards social mission, it has chosen not to register as either a non benefit corporation or a nonprofit organization. It is based in Santa Monica in California but is registered in Delaware for the purposes of tax. TOMS has been shown to operate with less than 100 people. The domestic price for TOMS shoes ranges anywhere from $44 to $98 per pair. This is despite the fact that the total cost of goods sold is an estimate that lies between $2 and $4 per pair. However, it is not clear what percentage of each sale is given towards the distribution and donation of the other pair. Profitability of the firm For a number of years, TOMS shoes has managed to grow and be estimated among the $100 million dollar companies. This tremendous growth has taken place only six years after the inception of the company. It has largely swept many consumers all over the world due to the cause-marketing campaign that is used by Toms. Toms Company has a vision that is mainly centered on the customer. This is also the company goal through which Toms creates consumers who are purchasing the shoes and also making a purchase that change then into benefactors. There is additionally another phrase that has been used to describe the model that is employed by the company. It is therefore a golden appeal where the customer gets a pair of shoes and a self satisfying sense that can only be provided by the shopping for a global good. With the unique nature of the business operation, it is considered to be the caring capitalism. Toms Company has developed this description by making it possible to incorporate the giving into the business model before it can be turned into profits. This makes it as integral to the business model in the sense that it acts in a similar way to the aspects that make it possible to generate revenue. Conclusion TOMS and its friends of Toms subsidiary are all committed and dedicated towards the mobilization and the connection as well as the empowering of individuals who are in need of giving further aid to communities that are served by the TOMS movement for a one on one movement. Toms is one of the companies which although is involved in a number of for profit activities, is also involved in some subsidiary not for profit operations that include charitable deals for the less advantaged in the society. This has created a huge influence on the society making it possible for the shoe company to attract more customers. With this, there has been an increased efficiency in the service production and delivery by the company. In turn, this has seen the increase in profitability by the company. However, there is still a great need to ensure that more approaches are taken to make it possible for the company to maintain its competitive position in the market. These steps will provide the need to expand the business operations in a number of ways. Owing to the philanthropic nature of the company, it will also ensure that the customer focused company goal is maintained and upheld to its expected levels. Recommendations for the future analysis of the company (trend analysis) Many individuals and analysts have recommended the upholding of the one on one business model by Toms. They contend that it is one of the principle ways through which the company can operate under the purposes of maximization. In this way, Toms will not only be selling shoes but ideals as well. The other most advisable step is for the company to continue working with other principle company so that they are able to increase their profits and also diversify their operations in terms of production as well as the ability to increase the efficiency of their operations. These include partnerships with some of the giving organizations such as the World Vision and The Feed the children to help in more donations. Besides the need for Toms company to be involved in several partnership deals with others, it is also a great requirement that Toms makes use of some blue chip corporate clout that will enable it to expand the way that it is able to offer its products and search for ways to expand abroad. In addition, the partnerships will enable the Toms Company to experience faster growth and to give to more people in more ways than they would if they worked alone. Despite the fact that the company will have to employ the services of another company for cloud computing, it will also be vital for them to improve the way that they collaborate with the suppliers and allow them to control the inventory flows all over the world (Oakland, 2013). If most of these recommendations are followed, then as indicated by the Wall Street Journal, Tom will be going a step further into the most blurring difference to produce both brand and charity. However, in this case, the brand will not in any way exist outside the charitable work. References Oakland, C.A. (2013). Supplier Management, Visibility, Procure-to-Pay among Capabilities that will Support Rapid Growth at Philanthropic Shoe Company. Retrieved 9 January 2014 from http://www.gtnexus.com/gt-nexus-selected-by-toms-to-provide-cloud-based-global sourcing-and-supply-chain-control-platform/ Short, Bradley. (2011). “SXSW Interactive 2011: A Responsible Business Recap”. Business Earth Profit Responsibly. Watkins, Tate. (2011). “A spectrum of social entrepreneurship: TOMS, Indego, and Henry Ford”. Read More