Company Analysis

Strengths

Revenue is up - Horniman’s strongest success indicator is its continued revenue growth over the past four years. This advantage becomes even more relevant when the company’s annual revenue growth – ranging from 2.9% in 2002 to 15.5% in 2005 – is compared to the industry benchmark of a 1.8% annual loss. This means that Horniman, unlike its competitors who have been posting a loss during the same period, has been able to reap robust economic benefits. In a nut shell, the company is booming while its rivals are shrinking. Efficiency and Productivity are up - Another good feature of the company is its ability to control the cost of goods sold over the years from spiraling upwards. Revenues from 2002 to 2005 grew 33% and Cost of goods sold grew 25%. The firm has been able increases its sales at a higher rate than the increase in expenses. This means that the firm is getting more efficient with its processes since the gap between sales and costs of goods sold is increasing. This is a sign of healthy business operations. Further, Horniman’s net profit has nearly doubled between 2002 and 2005 – soaring to $60,800 in 2005 from $32,600 in 2002. Profits are on the rise - Horniman’s gross profit has increased steadily, jumping from $385,600 in 2002 to $545,400 in 2005. Also because of efficiency, not only is Horniman producing more and selling more, it is able to capture larger margins. Profit margin for Horniman increased from 4.1% to 5.8% during 2002 to 2005.
Concerns

Erosion of cash - Horniman’s biggest problem is its inability to control cash flow. The firm’s cash has been slashed to $9,400 in 2005 from $120,100 in 2002. This is alarming because it can cause solvency issues. Cash flow is important for the survival of the company because it assures suppliers and employees that they can count on being paid on time