Financial Performance Analysis

1
Financial Performance Analysis

• K-Mart

2
K-Mart Through 2001

• Trends (5 years)
• Sale Growth 3.1 , 11 lower than the industry.
• In fact sales declined last quarter.
• Total expense grew at a faster rate than the
  revenue
• Conclusion

3
Liquidity Ratios

• Liquidity ratios show that K-mart is less liquid
  compared to its industry average. Especially the
  quick ratio shows that K-Mart might have serious
  problems in covering its short term debt.
• The difference between the current and quick
  ratios indicates that the company is holding a
  large amount of inventory.

4
Activity Ratios

• These ratios show that K-mart is processing its
  activities less efficiently than the average
  competitor.
• Especially, the inventory turnover shows K-mart
  is less efficient in selling its finished
  inventory compared to an average competitor.
• Also, the company is generating less revenue per
  employee compared to an average competitor.

5
Profitability Ratios

• These ratios show that K-mart is not as
  profitable as an average competitor. Especially
  the current net profit margin shows a negative
  number.
• However, given the cost leadership strategy the
  GPM is expected to be lower for K-mart than an
  average competitor. Although, the activities of
  K-mart does not seem to be as efficient as it
  should be for a low cost leader.

6
Leverage Ratios

• These ratios show that Kmart has less financial
  risks than that of an average competitor.
• Both D/A and D/E ratios show K-mart utilized less
  debt to finance its investment compared to an
  average competitor.
• Overall the financial performance analysis of
  K-mart shows, while less long-term financial
  risks, it very inefficient in its activities and
  it is suffering from liquidity and profitability
  problems. In the case of profitability problem,
  expense seems to be more of a problem than cost
  of goods sold.