It is believed that growth estimation is an important aspect of any business, big or small. The major aspects in these kinds of estimation are that by using past performance (or non-performance), a great deal of insight and perspicacity about the future could be discerned, even by a layman, who has comparatively lesser knowledge about the intricate mazes of financial business management, than an industry expert specialist who has been conjuring up these figures for quite some time.
R.G. Barry Corporation Company Ltd
In this exercise, the estimation of the Growth Rate of R.G. Barry Corporation.
Company Ltd is being estimated. All the figures are being provided in the spreadsheet attached (Attachment 1). The aspect that needs to be considered is that sales, or revenue generation are the most important factor that impinges upon the enterprise, not only because it provided resources for other business segments, but also because it singularly sustains and builds profits and earnings, which are necessary for future business growth. It impacts upon the building of fixed assets too.
For instance, during earlier years of the company, the capacity utilization may be lower and thus lower asset build up takes place. But as revenues and customers increase, it becomes necessary to add capacity to retain and increase a broad customer base; this entails an increase of both fixed kinds of assets, which produce more finished products and also the level of activity increases, necessitating more short term assets, like cash, bank funds, WIP, inventories, etc.
Many business and non-business aspects impinge upon growth determination
Coming to the specific case of R.G. Barry Corporation, it may be said that growth rates cannot be very adequately predicted since vagaries of markets, competitive elements and business and the highly seasonal nature of the business makes it rather difficult for financial estimation and economic analysis. Besides according to the management, “If we inaccurately forecast consumer demand, we may experience difficulties in handling consumer orders or liquidating excess inventories and results of operations may be adversely affected“ (R.G. Barry Corporation: Form 10-K Annual Report, 15).
All factors, controllable and beyond the jurisdiction of management help in evolving the growth patterns that are shown below.
The detailed analysis of the above is appended in EXCEL sheet attached. It could be said that business forecasts and growth rates of corporate are different from the normal kind of business forecasts and projections in that they entail percentage movements as evidenced above. These percentages could rise or it could also fall as evident from the red figures which depicts fall in growth rates due to supervening reasons. This it would not be amenable to arithmetic progression or computation through arithmetic mean, in which case only averages are considered and not the weight age. For instance, there may be consistent sales growth in the various months that constitutes a particular year, but in one month, the sales may be dramatically high due to seasonal effects. If one were to go just by just AM, the dramatic increase in one month may vitiate the trend conspicuously. Thus in such cases, it is necessary to go in for geometric means which evens out the vicissitudes in sales figures, etc.
Business is subject to constant variations due to many factors, and thus trend analysis is also an unwieldy, yet interesting exercise for financial analysts and economic specialists.
Works Cited
R.G. Barry Corporation: Form 10-K Annual Report. Washington, D.C: United States Securities and Exchange Commission. 2008. Web.