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Fossil Inc. Financial Statement Analysis

2301 words - 10 pages

FOSSIL INC. FINANCIAL STATEMENT ANALYSIS

PART 1

10/16/2011

Table of Contents6
Introduction 1
Chosen Policies and Quality of Numbers 1
Part 1: Overview of Balance Sheet 1
1.1 Major types of assets and unusual amounts of components 1
1.2 Major types of liabilities and unusual amounts of components 2
1.3 Major types of Equities and unusual amounts of components 2
Part 2: Overview of the Income Statement 3
2.1 Major sources of revenues, expenses, gains and losses 3
2.2 Unique Items for Income Statement for recreational goods 3
2.3 Unusual amounts changes in the Income Statement 3
Part 3: Overview of Statement of Cash Flow 4
3.1 Analysis for operating ...view middle of the document...

Chosen Policies and Quality of Numbers
Chosen policies
Inventories are stated at the lower of market or average cost (LCM). When the current value of Fossil’s inventories is less than its reported cost, Fossil would set up an allowance for inventories. The inventory allowance reduces the reported inventory amount to the current market value.Fossil Inc. increases its bad debt allowance in the 2010 fiscal year because of the difficult economic environment, such accounting policy increase the amounts of accounts receivable in the Statement of Balance Sheet.
Quality of numbers
Pervasive constraint is benefits> costs, user-specific quality is understandable, overall quality is decision usefulness, primary decision-specific qualities are relevant and reliable, ingredients of primary qualities are predictive value, feedback value, timeliness, verifiability, representational faithfulness and neutrality, secondary and interactive quality is comparability and consistency and threshold for recognition is materiality.
Fossil Inc.’s Financial Statements do not show that it is aggressive since the D/E ratio is < 0.01, it shows Fossil Inc. runs mainly by its equity but not debt. Also, Fossil Inc. is not a risky but a profitable company, maybe it will be much stronger in future according to its ranking and financial statements.

Part 1: Overview of Balance Sheet

1.1 Major types of assets and unusual amounts of components
In exhibit 1, total assets for Fossil was $1,467,573 thousands, there were cash and cash equivalents (27% of the total assets), inventories (25% of the total assets), accounts receivable (18% of the total assets) and PPE (15% of the total assets). As a retailer and manufacturer, those assets are essential to Fossil Inc. One unusual amount of components is that the amount of accounts receivable is much bigger than that in the last three years, the notes about accounts receivable says that bad debt explains the most of the increase because of the competing global business. Another one is that the sharp increase of inventories, it may result from sales increase.
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1.2 Major types of liabilities and unusual amounts of components
In exhibit 2, the total liabilities of Fossil Inc was $415,865, accrued expense (44% of total liabilities), accounts payable (29% of total liabilities) and deferred income tax liabilities (12%) are the main types of liabilities. Fossil receives many orders every year, so the accrued expense is taken into the main liabilities. Additionally, based liabilities should be one of the main liabilities since Fossil need money to expand. Royalties in 2010 are 2.368 times as many as those in 2009, and deferred income tax liabilities are 1.77 times as many as those in 2009. Those may all because Fossil wants to expand its market share.
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1.3 Major types of Equities and unusual amounts of components
In exhibit 3, treasury stock (-17.3%), additional paid-in capital...

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