Analysis of Case - Spartech Corporation Assignment Help
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In the business culture operating within an economy having irrespective number of business (whether being one or more) challenges is faced continuously. These challenges vary according to the legal forms, business in which the company is into and many other things. Therefore, the fact that the analysis of the various financials by using the techniques of financial management needs to be conducted to check with the expected results and also to compare the same with the benchmark of the industry.
Purpose of Paper:
The purpose of the paper is the analysis of the various aspects of the fact that it was necessary for the company Spartech Corporation to reorganize its three major segments of reporting namely Custom Sheet and Roll stock, Packaging Technologies and Color and Specialty Compounds. Moreover, the analysis of the validity and the extent of appropriateness of the company discontinuing its three business and selling its wheels and profile business have been conducted. The same is done using techniques of financial management namely ratio analysis.
Overview of paper:
The paper is basically the analysis of the fact that mere a company discontinuing a business without considering the extent of the validity cannot be considered appropriate. Therefore, in this paper the validity of the company changing the structure of reporting segments along with closing down its operations have been analyzed. This analysis can be so severe that it can put a question on the actions undertaken by the organization also.
2. Evaluation Of Form 10k Of Spartech Corporation:
It is very much important that the facts that should be given consideration for the analysis of any financials needs to be selected with utmost care as because those are used for making financial decisions. This means that the stakeholders and most importantly the management, while making the decisions with respect to the business should not ignore the conditions of probability of occurrence of risk and uncertainty. This is because of the fact that without the consideration of those while conducting business and making decisions pertaining to them can results in negative business decisions (Adler, Michael, 1970). The best way that can be applied is that the assumptions undertaken during the consideration should be with perfect knowledge.
In the given case, the company Spartech being in the business of acting as an intermediary for processing of engineered thermoplastics, polymeric compounds and concentrates have undergone many constitutional changes during course of time. Form 10K is an annual report which is required to be filled and submitted by companies in accordance with the United States Securities and Exchange Commission (SEC) which contains the summary in a comprehensive way of the financial performance of the companies. However, there is difference between the annual report to shareholders and Form 10K, as because the Form 10 K contains many additional information other than those circulated among the shareholders. The form 10K of the company contains the description of the Board of Directors, the members of the audit committee, along with the table having information about the compensation of the director. The director compensation table is as follows:
The other principles in relation to compensation to director in any form have been well explained in the Form 10K so that there is clarity in thoughts of the management along with making the regulator satisfy with the fact that the payments made to the directors are out of unbiased nature and is not influenced. The form also contains the list of Grants of Plan-Based Awards for the Fiscal Years along with awards for outstanding equities. It can be analyzed from FORM 10K that the policies of the company framed for the compensation and all the related aspects including controlling interest is very exhaustive and therefore gives a clear picture of the company being fair for the same. Form 10K is required to filing annually whereas for the three quarters there is a separate Form which Form 10Q which is required to be filed. The following are the parts of FORM 10-K of Spartech Corporation:
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• Business: Producer of custom thermoplastic sheet, roll stock, specialty compounds and engineered plastic materials.
• Risk Factors: There are many factors of risks such as Increase in price of raw materials, risk of cyclical nature of suppliers and customers, competitive market, incurrence of significant charges, business interruption because of application of new technology, problems in integration of processes, etc.
• Unresolved Comments of Staff: These are NONE for this company
• Properties: The company have in total 41 facilities of manufacturing
• Legal Proceedings: None
• Mine Safety Disclosures: None
• Market: The common stock of the company is listed and traded in the New York Stock Exchange (NYSE) and the symbol of the company Spartech Corporation is SEH
• Consolidated Financial Data: The data of the company along with all the subsidiaries are consolidated and presented to the regulator.
• Management Discussion on the Financial Condition: The management have given an overview of the business by diving the % of sales which is reflected below as pie chart:
· Quantitative and Qualitative Disclosures: All disclosure in relation to the numbers, figures along with major decisions taken and their implementation are reported
· Changes in and Disagreements with the Accounting: The changes in the three major segments of reporting along with their justification provided
· Controls and Procedures: Ensuring reports to be true and correct and their timely accumulation
· Other Information: None
· Details of Directors, Executive Officers and Steps taken for Corporate Governance
· Compensation of Executives
· Independence of Director
· Accounting Fees
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1. Analysis of Financial Performance Of Spartech:
The managers of the company have taken an effective step for greater profitability that be achieved and can be pursued in long run. Most of the financial analysis is conducted making the use of ratios. Ratio Analysis is the best method and also the common method used as because it takes into consideration the historical data for determining the performance of the company and comparing the same with the benchmark of the industry in which the company(Arshad, Asma ,2012). After the comparison, the deviations are seriously been looked upon by the managers to mitigate the same. There are many other factors that are required to be considered while computing ratios other than mere analysis of cash outflows and inflows and that is the analysis of the probability of occurrence of those cash inflows and outflows that have been accounted by the managers (Amy Gallo, 2014). The ratio analysis of the company has been done as below:
Therefore, we see that though the company is earning profits still the company needs to plan well their expenditure and financial risks to meet the industry benchmark and to attain a stable position.
4. Discussion of The Company's Considering Changes in Its Reportable Segments:
The most important fact for a firm is reporting. This is because the reporting done by the management along with the accountant is used by the investors and other stakeholders for making financial decisions for the company (Scheepers, Cor, 2003). Tremendous increase in profits are not always beneficial and that cannot always turns out to be positive (Dennis A. Rondinelli and Ted London, 2003). This becomes of utmost importance in those projects where the sustainability and survival of the firm is in danger.
In the given case, the company has made many significant changes in its three major reporting segments over period of time which is being justified by the management towards the step taking for appropriate reporting needs fulfillment. This was done because earlier certain expenses and sales relating to some other process were charged to the other one which needed to be rectified for getting clarity in reporting (Burt, Oscar R. And Robert M. Finley, 1968). In case of risk of an event in a near future that can have a clear impact on the firm's existence, needs to be evaluated yearly and thus the project should also be executed in parts and bits. The options that have to be chosen are required to be analyzed effectively after considering the facts and figures of the project and the industry within which the firm operates (Sayan Banerjee, 2015).
Therefore, we can see that mere positive results in the financial performance are not always beneficial for the company as because the management of the firm needs to analyze the method of calculation along with the risk associated with the same has to be considered while making business decisions.
In the given case, Spartech Corporation reporting under three segments although reflecting high values ignores the fact that the expenses needs to be reassessed. The solution to this was to change the items included under the reporting heads to have clarity in the financial performances and the results. The company Spartech Corporation although stands in a stable position as reflected by its annual report but still it needs to analyze the same with that of the industry's benchmark to have a more clear picture.
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