Types of Analyses – There are three types of analysis to do:
• A snapshot analysis of the current state of the company
• A trend analysis in which you use historical data to assess the direction in which the company is headed.
• A forecasting analysis, in which you offer some predictions as to the future direction of the company (forecast 5 years).
Frames of Reference - In addition to your target company, you are going to need frames of reference with which to compare your target company, namely:
• An industry reference: the primary industry is rubber stamp manufacturing NAICS code 339943. Available census data will allow you to make some statements about whether Stampin’Up is performing better or worse than the industry. Also, if you can find financials for another rubber stamp manufacturer it would make an interesting comparison.
Wherever appropriate and possible, you should take the values determined for your company and compare them to the above frames of reference.
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.EXECUTIVE SUMMARY
This report provides detailed analysis of several aspects of Stampin’ Up, a rubber stamp manufacturing company. It is divided into eight parts, six of which are devoted into assessing the Company in terms of the appropriateness of form of business organization, interpreting quantitative, financial ratios, forecasting financial statements over a five-year period, determining its weighted average cost of capital, performing economic value added analysis, and conducting enterprise valuation. It opens with a company brief and concludes with a recapitulation of key points in the discussion. The overall goal of this report is to aid the owner and management in their strategic plans for the future to be able to take Stampin’ Up further, dominating even more the art & office supply manufacturing industry of the US and probably the world.
Stampin’ Up is a privately-held company based in Utah, USA and operates in the art & office supply manufacturing industry (Wood and Godfrey n.d.) and (www.stampinup.com). The Company’s specific sector within the industry is composed of establishments primarily engaged in the manufacture of marking devices – manual stamps, embossing stamps, and stencils (www.naics.com). Specifically, Stampin’ Up niches as a rubber stamping crafts business.
“Stampin’ Up is growing and it is profitable” were the words of president and COO, Gerald ‘Jerry’ Day (Wood and Godfrey n.d.) when asked about the overall financial status of his company. This is corroborated by information from historical financial statements. Financial highlights for 2016 include:
• Sales of $202 million
• Net income of $12 million
• Total assets of almost $70 million (Wood and Godfrey n.d.)
Behind the success of this Company is a woman, Shelli Gardner, who is a co-founder and the current CEO. Recognized for her strategic leadership of the Company, Shelli is best described as a source of ‘inimitable’ competitive advantage through her ‘personality, relationships, knowledge, and intuition (Wood and Godfrey n.d.).
At present, Stampin’ Up has international market reach, through the presence of its demonstrators in countries such as Puerto Rico, Canada, Australia, New Zealand, Germany, and Japan (www.stampinup.com). They are responsible in delivering experiential services to customers through product demonstration.
Jerry together with Shelli and the management team are going to make important decisions about the path into the future the Company must take. Outputs from the following sections will prove useful for well-thought out, informed decisions by them.
Prior to discussing the reasons for the most beneficial choice of organizational form, it will be assumed, for purposes of maximizing the options available, that Stampin’ Up is operated as a sole proprietorship, with Shelli Gardner as the single owner. (At present, Stampin’ Up is a privately-held company, hence, a corporation). With this assumption in mind, it has been deliberated that based on the various analyses of the current and future conditions of the business (see latter sections), either a limited partnership or a limited liability corporation is the most advantageous form at this stage of the business’ life cycle.
Minimize Dilution of Ownership
Based on the assessment of its current and future financial performance, financial position, and cash flows, Stampin’ Up does not need a lot of owners to get involved in strategic planning or concur with management with regards crucial business decisions. For thirty years now (since its inception in 1988), the Company has been very successful. The risks associated with opting for a public corporation form will result in loss of concentrated control over important decisions from existing key employees. At this point, Shelli, Jerry, and the rest of management have done a fantastic job already. If it is not broke, don’t fix it.
More details about their fantastic accomplishments will be provided in latter sections.
Lack of Urgent Need to Raise Debt and/or Equity Capital
Based on projected financial statements (2017-2021) and analyses thereof, it was determined that at the current actual sales growth rate of 30%, there is no need to raise funds either via debt or equity financing. (More details about this in latter sections). Normally, the most compelling factor that warrants growing and profitable companies to evolve into a corporate form of business is the need for financial resources. As for Stampin’ Up, it has more than enough of the wherewithal it needs. In fact, it is projected that only when the Company operates at a growth rate close to 58% (or beyond) will it have to worry about additional funds.
Maximization of Owners’ Wealth Strategies
Thinking about the most appropriate form of business organization for Stampin’ Up focuses on the possible sources of threats to maximizing the earnings potential of the business. Shelli Gardner, being an owner, is really motivated to further its interest. But what about Jerry and the rest of management? And how about the demonstrators who are core in the successful operations of Stampin’ Up?
At this point, members of management are evaluated to be loyal to the Company, having been employed for a long time. Moreover, they have demonstrated genuine interest in growing the Company, hence, its current financial status. Thereby, it is recommended that these stewards be given incentives that will make them own equity interest in Stampin’ Up. By converting managers into owners, this will reduce potential agency conflicts....
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