Museum of Contemporary Art of Georgia Financial Analysis

Notes to financial statement

Notes to consolidated financial statements give a detailed explanation of the values reported in the income statement, cash flow statement, statement of changes in equity, and balance sheet statement. Further, the notes give details or explanations of the information that were not included in the financial statements. The financial statements of the Museum of Contemporary Art of Georgia are accompanied by 20 notes (Eugene 14). The first note focuses on the accounting policies employed by the company when preparing the financial statements. The second note gives more information on the unauthorized transaction-related costs and recoveries. The analysis was carried out for the period between 2012 and 2014. The third note gives information on accounts receivables. It gives information on the opening account balance, expensed provisions, and amounts written off. The fourth note gives information on inventories that is, raw materials, work in progress, finished goods, and reserves for obsolete inventory (Vance 12). The fifth note gives information on equipment and leasehold improvement. It shows their opening balances, closing balances, and the accumulated depreciation.

The sixth note gives the opening balances, capitalized software cost, accumulated amortization, and closing balances for product software and development expenditure (Holmes 24). The seventh note gives information on current and deferred income taxes. The eighth note gives information on the credit facility of the company and the interest rates. The ninth note gives information on accrued liabilities. The next note gives information on product warranty obligation. It shows the amount that the company spent on a product warranty (Ormiston 28). Note eleven and twelve give information on deferred compensation and interest expense. Note thirteen and fourteen give information on income per common and common stock equivalent share and stock option. The fifteenth note gives information on the stock purchase agreement. Note sixteen gives additional information on the cash flow statement (Subramanyam 31). Note seventeen gives the amount the company contributed to the employee benefit plans. The eighteenth note gives a breakdown of foreign sales and significant customers. Note nineteen and twenty give information on commitments, contingencies, and legal matters.

Balance sheet

The table presented below shows a summary of the balance sheet.

2012 2013 2014
Total cash 1109 1168 1380
Total current assets 6422 6827 7022
Net property, plant, and equipment 3102 3034 3041
Total assets 15181 15396 15544
Total liabilities 4181 4260 4924
Total stockholders’ equity 11000 11136 10620
Total capital 15181 15396 15544

The total assets of the company fluctuated during the period. This can be attributed to the fluctuations in the various items such as cash, property, plant, and equipment among others. Further, equity makes up a higher percentage of total capital. This can be attributed to the fact that the company depends on donor fund funding. It does not have debt in the capital structure.

Income statement

Vertical analysis of income statement

Vertical analysis of income statement 2012 2013 2014
Revenue 100.00% 100.00% 100.00%
Gross profit 45.67% 60.42% 64.70%
Sales, General and administrative 5.67% 26.00% 11.34%
Restructuring, merger, and acquisition 20.67% 19.31% 6.55%
Other operating expenses 0.00% 0.38% -.80%
Total operating expenses 26.33% 45.70% 3.99%
Operating income 72.00% 14.72% 60.70%
Interest Expense -4.00% 18.74% -21.41%
Other income (expense) -136.67% 116.06% -24.76%
Income before taxes -204.67% 112.05% 57.35%
Provision for income taxes -124.00% 108.80% -10.38%
Other income 0.00% 0.00% 0.00%
Net income from continuing operations -80.67% 3.25% 67.73%
Other 4.33% -1.15% 0.32%
Net income -76.33% 2.10% 68.05%
Net income available to common shareholders -76.33% 2.10% 68.05%

From the table above, gross profit increased by 14.26% from 2012 to 2013. Thereafter, it declined by 4% in 2014. On the other hand, restructuring, mergers, and acquisitions declined by 0.07% from 2012 to 2013. It further declined by 13.79% in 2014. Net income increased by22.43% from 2012 to 2013. The increase can be attributed to the fact that operating expenses declined by 21.41%. It declined by 12.76% in 2014. Despite the decline in sales and profitability, operating expenses increased negligibly by 0.37% from 2012 to 2013. The decline in sales reported in 2012 was attributed to an increase in the cost of operations at the Museum of Contemporary Art of Georgia. This led to an increase in the cost of administrative activities. As the law of demand states, an increase in price lead to a decline in the quantity demanded of a normal good. This explains the decline in profitability.

Cash flow statement

2012 2013 2014
Net cash flow generated from operating activities 696 1262 1479
Net cash flow used for investing -494 -582 -2456
Net cash flow generated from (used in) investing activities -148 -434 705
The net change in cash 59 212 -354
Free cash flow 220 684 759

There was a general increase in the amount of cash flow generated from operating activities. The organization also made a lot of investments during the period. Further, the amount of cash flow generated from investing activities fluctuated during the period. This can be attributed to the fluctuations in the number of donor funds received during the period. The information in the table above shows that the company experienced short of cash in the year 2014. This can be attributed to a massive investment made in the same year (Helfert 42).

Financial ratios

Liquidity

Ratios 2014 2013 2012
Current ratio 2.28 2.87 2.51
Working Capital $M 1042.10 1348.40 1086.30

The current ratio and working capital fluctuated during the period. This can be attributed to the variations in the values of current assets and current liabilities. The company had a high value of current ratio and working capital in the year 2013. Further, it can be observed the company had a high value of liquidity ratio. This implies that it is in a position to pay the short-term liabilities using current assets with ease.

Leverage

Ratios 2014 2013 2012
Total liabilities to assets 0.02 0.04 0.03
Total liabilities to equity 0.06 0.08 0.04

The company had low values of leverage ratios. This can be attributed to the fact that it depends entirely on donor funds. There are no long-term debts in the capital structure. The ratio fluctuated during the period.

Profitability

Ratios 2014 2013 2012
Return on Assets (%) 2.54 2.62 5.35
Return on Equity (%) 9.28 9.5 18.01

The profitability ratios improved over the period. This can be attributed to the effective cost management strategies that were put in place by the institutions.

A comparison with other companies

The performance of MOCA GA can be compared with other players in the industry. The museum is smaller in size when compared to other players in the industry. There are other players with larger financial sizes as compared to MOCA GA. However, the ratios show showed that the company performed better than other players.

Summary

The ratios of the company indicate stability in financial profitability. This means that the company can sustain current and foreseeable future operations since its liquidity and leverage levels are predictable. Therefore, the Museum of Contemporary Art of Georgia is an ideal organization to received donations.

References

Eugene, Brigham. Financial management theory and practice, USA: South-Western Cengage Learning, 2009. Print.

Helfert, Erich. Financial analysis, tools and techniques: Assessment of business performance. New York: McGraw-Hill books, 2001. Print.

Holmes, Green. Interpreting company reports, New York: Harlow, 2008. Print.

Ormiston, Fraser. Understanding Financial Statements. 7th ed. 2006. New York, NY: Cram 101 Incorporated. Print.

Subramanyam, John. Financial Statement Analysis. 11th ed. 2013. New York, NY: McGraw- Hill Education. Print.

Vance, David. Financial analysis and decision making: Tools and techniques to solve. United States: McGraw-Hill books, 2003. Print.

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BusinessEssay. 2022. "Museum of Contemporary Art of Georgia Financial Analysis." November 26, 2022. https://business-essay.com/museum-of-contemporary-art-of-georgia-financial-analysis/.

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BusinessEssay. "Museum of Contemporary Art of Georgia Financial Analysis." November 26, 2022. https://business-essay.com/museum-of-contemporary-art-of-georgia-financial-analysis/.