M3.5 Assignment: Financial Statements as a Key Source of Information for Financial Decisions

Introduction

Assume that you are a Financial Manager for Boot Barn Holdings, Inc. You are preparing to discuss the company’s current financial position with the Board of Directors following the release of the firm’s Audited Financial Statement.

• Boot Barn has 37,500 shares of common stock outstanding.
• The market price for a share of stock at the end of 2021 was $87.
• Assume that this company’s growth rate is 11%.

As Boot Barn’s Financial Manager, you are expected to offer an authoritative interpretation of the firm’s recent performance.

Use the financial information below to analyze Boot Barn’s operations. This information will allow you to compute common financial ratios in the four areas where these are most often applied to analyze firm performance. These ratios will strengthen the Board’s ability to understand the activities or practices described by a particular ratio. You will also see that Audited Financial Statements allow this easy analysis and that benchmarks for common ratios put common financial ratios into perspective.

Comparing Boot Barn’s operations against specific benchmarks to assess the firm’s performance and drawing conclusions regarding financial performance using computed ratios will demonstrate your understanding of the firm’s position—increasing confidence in you as a manager. You will also plan to strengthen your analysis by comparing Boot Barn’s operations to the operations of competing firms G-III Apparel Group Ltd. and Destination XL Group, Inc., although you will not talk about these firms in detail.

Corporate Information

Boot Barn Holdings, Inc. (ticker symbol “BOOT”) is a publicly held retailer of western and work-related footwear, apparel, and accessories. Its products include boots, jeans, accessories, hats, gifts, home products, and work wear. It controls branded items including Wrangler. The company was founded in 1978.  

Boot Barn’s primary product line consists of products that might be considered non-discretionary in nature. Consumer spending on non-discretionary goods tends to be more stable across the business cycle. Non-discretionary goods include consumer goods such as soap, toothpaste, protective gear, and clothing necessary in certain trades.

Boot Barn also provides a complementary array of discretionary goods. Consumers tend to make more discretionary purchases during favorable economic conditions. Discretionary spending depends on general business conditions including the level of interest rates, consumer confidence, and the availability of consumer credit. Purchases of discretionary goods may decline when disposable income falls or during unfavorable economic conditions (whether actual or perceived). 

Instructions

Analyze the financial performance of Boot Barn using the following tools:

1. 1. Time and trend analysis
   2. Peer-group analysis
   3. Two or more financial ratios (introduced in Module 2’s assigned readings) in each area which will allow you to evaluate the following four aspects of performance:

• • • Short-term solvency
    • Asset Utilization
    • Long-term solvency
    • Profitability

Evaluate Boot Barn’s financial position using the firm’s DuPont Identity, considering:

1. 1. operating efficiency (as measured by profit margin),
   2. asset use efficiency (as measured by total asset turnover), and
   3. financial leverage (as measured by the equity multiplier).

Determine the PEG ratio.

1. 1. Construct Boot Barn’s PEG ratio
   2. Evaluate this PEG ratio.

Draw conclusions, make recommendations, and address the limitations of your analysis.

Your paper should be 4 to 6 pages in length (not including the title and reference pages).

Your paper should be double-spaced, with 1-inch margins, in-text citations, and references for all sources following proper APA formatting.