Week FIve Essay

Week FIve Essay Week FIve Essay Hastings Entertainment ACC 205 Principles of Accounting I Instructor: Theresa Murray June 14, 2014 Hastings Entertainment Hastings is a multi-media entertainment retailer. They sale, books dvd’s, cd’s, and accessories as well as rent dvd and blue ray discs. Hastings is primarily located in the western and mid-west portions of the United States having one hundred twenty six stores. In addition the company operates other concept stores. The company’s main competitors would be Wal-Mart, Blockbuster and Barnes and Noble according to Hoover’s A D & B Company. (Hoover's Inc., 2014) Although the fore mentioned companies have all taken a hit due to digital media i-tunes, amazon and Netflix. With the closing of two Hasting stores one in Missouri and one in Kansas with in the last year a financial analysis will be done of Hastings Entertainment to try and determine the profitability of the corporation to discover the reasoning behind store closings. Hastings Entertainment Income Statement (Numbers are in Millions) 2011 2012 2013 Cash and Equivalents 6.1 4.2 3.7 TOTAL CASH AND SHORT TERM INVESTMENTS 6.1 4.2 3.7 Inventory 146.6 151.4 145.3 Prepaid Expenses 11.7 15.2 9.1 Deferred Tax Assets, Current 6 TOTAL CURRENT ASSETS 170.5 170.8 158.2 Gross Property Plant and Equipment 279.3 288.6 289.7 Accumulated Depreciation -224.5 -236.5 -246.3 NET PROPERTY PLANT AND EQUIPMENT 54.7 52.1 43.5 Deferred Tax Assets, Long Term 1.7 Other Intangibles 0.4 0.2 0.2 Other Long-Term Assets 2.4 2.4 2.8 TOTAL ASSETS 229.7 225.5 204.6 Total Assets Accounts Payable 60.6 51.3 53.6 Accrued Expenses 13.80 12.10 12.5 Current Income Taxes Payable 0.40 0.70 0.8 Other Current Liabilities, Total 0.80 2.50 2.6 Unearned Revenue, Current 11.1 10.9 11.6 TOTAL CURRENT LIABILITIES 86.7 77.4 81 Long-Term Debt 31.8 53.3 41.8 Deferred Tax Liability Non-Current 0 0.1 Other Non-Current Liabilities 6.5 8.7 7.8 TOTAL LIABILITIES 125 139.4 130.7 Common Stock 0.1 0.1 0.1 Additional Paid in Capital 36.7 36.2 36.4 Retained Earnings 88.6 71 58.6 Treasury Stock -20.8 -21.4 -21.4 Comprehensive Income and Other 0.1 0.1 0.2 TOTAL COMMON EQUITY 104.7 86.1 74 TOTAL EQUITY 104.7 86.1 74 TOTAL LIABILITIES AND EQUITY 229.7 225.5 204.6 The horizontal analysis is used to compare the company information for more than one year at a time. The horizontal analysis can be used to research changes and trends within the company over periods of time whereas the vertical analysis converts the numbers to percentages and is from the balance sheet making it more complex to analyze. Hastings revenue dropped $24.7 million dollars from 2011 to 2012 and dropped $229,585 from 2012 to 2013. With such a decrease in revenue the company would need to find ways to decrease expenses to maintain profitability. This did not happen for Hastings cost of goods sold did decrease but operating expenses increased in 2012 and in 2013 it looks as if the company is recouping from 2012 but they are not making a lot of headway. Judging from the horizontal balance sheet long term debt increase in both 2012 and 2013 and retained earnings has drastically reduced 2011 to 2013. This could be read as stockholders are cashing out and reinvesting in different companies. 2012 2013 Current Ratio 161.76% 156.54% Quick Ratio 25.60% 15.93% Cash to Current liabilities ratio 0.54% 0.46% The current ratio is used to indicate Hastings ability to pay its debt with in the next year. This shows the liquidity of the company the higher the ratio the more liquidity the company has, in this