FOREST OF FLOWERS
Jia Deng, Elias Eid, Giulia Germani and Sofía Margarita
SWOT ANALYSIS
STRENGTHS OPPORTUNITIES
• Watson expertise (25 years in retail operations:
merchandising, franchising and distribution)
• Competitive pricing (High margin) • Local expansion in Ontario (outside London)
• Exceptional service, streamlined distribution chain and • Continue opening next to high traffic areas
large volume purchases which allow them to get better
prices than smaller florists. (Economies of scale)
• Have a seat on the Ontario Flowers Growers Co-
• Convenient store location in high traffic areas operative Auction (OFG) which could give him
• Broad selection and diverse products access to international growers and low prices.
• Excellent reputation
• Quality Guarantee
WEAKNESSES THREATS
• Costly rent in prime locations
• Highly reliant on credit for growth
• Seasonality of purchases (Special holidays)
• Low accounts receivable turnover
• Growing protectionism
• Non availability of raw product depending on
• Increasing buyers bargaining power
growing requirements
• Business model not that scalable
CASH FLOW STATEMENT
While we can see a clear decrease in the Net
Income from year 2002 to 2003 the Cash flow from
operations is doubling which is a good sign of
healthy growth. Furthermore, this could be a sign
of the business scaling well.
On the other hand, the Cash Flow from financing
activities is increasing, mainly because of capital
injection from shareholders.
Finally, we can observe that the cash flow from
investing activities have decreased about three
times due to investment in new stores.
HORIZONTAL ANALYSIS
Taking 2001 as our base year, we can see a 1%
increase in Net Sales with a consequential 5%
increase in Cost of goods sold and a Gross profit
decrease of about 2%.
We also noticed how Operating expenses are stable,
which can be interpreted as a sign of good
management.
The decrease in EBITDA (operating profits) by
15.41% causes concern because this might be due to
the increase in the Cost of Goods Sold.
VERTICAL ANALYSIS
Comparing with other businesses in the
industry, Forest of Flowers, is considered
more profitable because of their ability of
keeping a low COGS (7% less than industry
average).
That translates into an approximately 7%
higher Gross Profit than the industry.
The EBITDA is very attractive as results five
times higher than the industry average
(0,7%), this shows a sign of very good
resource utilization management.
LIQUIDITY RATIOS ANALYSIS
CURRENT RATIO: 2.70, it’s a good indicator that the company has 3 times more current assets
than liabilities.
QUICK RATIO: 1.48, shows that the company can repay its short-term debts without having to
liquidate any inventory or current assets.
CASH RATIO: 1.88, shows that the company is more than capable of repaying their short term
debts with the cash they have.
WORKING CAPITAL ANALYSIS
We have a high and positive Working Capital, which is a clear indicator that the company is not at
risk of needing to urgently liquidate any assets in order to continue operations normally.
ASSET MANAGEMENT RATIOS ANALYSIS
This company is showing a considerable high
Total asset turnover which is an indicator that it
is rather effective in generating revenues.
Having an A/R Turnover in days 2 times higher
than the A/P one, means that the company is
paying twice as frequently its accounts payables
than earning from customers its A/R, which
could be problematic.
Even more considering that the industry average
is 31 days for A/P. Therefore, Forest of Flowers,
has the possibility of asking their suppliers for a
longer repayment period.
PROFITABILITY RATIOS ANALYSIS
GROSS PROFIT MARGIN of the company is 6,5% higher than the industry average which is a
good sign, showing their profitability increase.
OPERATING PROFIT MARGIN is very attractive as results five times more than the industry
average (0,7%), showing a sign of very good resource utilization management.
THANK YOU!
