Sample Essay

The financial statements of a business need to be analyzed appropriately for the firm’s financial status to be determined. Torres is the financial analyst of the Costco and she uses five financial factors in the determination of the future performance of the firm. These factors are appropriate since she has applied the best factors to determine the financial position of the firm. For instance, she uses the internally generated funds to determine the growth of the firm. She has a very effective and reliable way of determining the investment capacity of the firm since the application of discounted rate of future cash flows is the best. Her analysis does not depend on a single source of information implying that the results se gets are very reliable and realistic. Her growth drivers are the number of warehouses, sales per store, membership base, operating margins and international expansion. These factors are appropriate since she considers each of the business warehouses alone in the calculation of its contribution margin.

Although she does her analysis by considering the five factors extensively, she has left out some other factors which she could have included in her analysis. The fixed costs involved in the laying out of each warehouse should be considered so that she can be able to determine whether the setting of each of the warehouse is profitable. Further, each of the warehouses should be equipped in accordance to what satisfaction the residents expect to get. Some customers expect high quality and prestigious goods while other prefers very cheap products.

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