Corporations that have the privilege to earn a position on the Fortune 500 means that you are one of the most powerful companies in America. If a company has the ability to hang around for over 40 years that means they have withstood the changes most industries will endure. Since the popularity of electronics began in the late 20th century, many corporations like Sony and Apple has tried to fill consumers wants and needs. Trying to meet these goals has created opportunities for many big box retailers to leverage their ability to reach a national audience. This type of power has given retailers such as Apple, Sony, Target, Walmart, Radio Shack and Best Buy tremendous revenues that will influence potential shareholders.
When a business analysis is looking at a company to recommend to his clients, he or she will review a company’s financial statement to see how they are performing. The area of the financial statement a business analysis will focus on is a company’s cash flow, their operational cost, balance sheet and their position in the industry. These positions could be their supply chain, the advantage they have over their competition and their vision for long-term success. In this paper, I am going to continue analyzing Best Buy and it’s competition by conducting a benchmark analysis, their financial health and their utilization of technology and their global business strategies. Best Buy is in a unique position because they have withstood the downturn in the economy where their national competition like Circuit City has faltered and closed their doors permanently. FINANCIAL HEALTH
After looking at Best Buy’s financial statement compared to their closest competition that sells electronic items, which is Target and Radio Shack, their total equity on their balance sheet has varied in the last five years (MSN/money, 2012). The balance sheet will outline what the company owes compared to what they own on a certain day (Nickels, McHugh, & McHugh, 2010). Best Buy has seen their equity grow in each of the last five years from $4,484 million to $6,602 million last year. Last year, they reduced their long term debt however the amount of investors increased resulting in their total liabilities staying consist over the last few years. In comparison, Target has increasing deferred taxes that is increased year over year.
When looking at the income statement, there was a consistent fluctuation for their net income over the last five years (MSN/money, 2012). In 2011, Best Buy saw it’s highest net income at $2,920 million however in the previous two years, their net income was a lot lower falling below $2,488 and $2,214 million (MSN/money, 2012). The income statement will show what the company has earned selling it’s products compared to its selling cost compared to a specific date in a certain time period (Nickels, McHugh, & McHugh, 2010). In the cash flow statements, all three companies paid out more cash in 2011 compared to what they had coming in. The cash flow will track and highlight the differences between cash incoming compared to what is outgoing for the business. Both Radio Shack and Best Buy reported paying their deferred taxes on their cash flow statement compared to Target reporting it on their balance sheet. All three companies will report some of their items in different areas of their annual report however they will have to provide a detail for each line item.
As an analysis, the area I would be concerned with the greatest is Best Buys total liabilities on their balance sheet. In 2011, their total liabilities increased from around $12,500 million in the previous three years to over $17,000 million. That variance is not a gradual increase compared to the previous years and I would have to research what caused such a significant increase. In contrast, their competition had gradual increases over the same time period. That would be a concern if I were thinking about making a stock investment in...