Disclosure_Analysis_Paper

Disclosure Analysis Paper ACC 422 March 5th, 2012 Disclosure Analysis Paper Dick’s Sporting Goods, Inc. is a publicly traded company that ends its fiscal year on the Saturday closest to the end of January. It can be found on the New York Stock Exchange under the DKS. The purpose of this paper is to analyze the cash and cash equivalents, the accounts receivables, and the inventories that have been reported on the company’s last 10k statement. Cash and Cash Equivalents Dick’s Sporting Goods, Inc. (Dick’s) cash and cash equivalents is based on the cash on hand and all highly liquid items purchased that has a maturity of three months or less at the date it was purchased. Interest was also earned on the cash equivalents during the time of this financial statement. In fiscal year 2011, they earned $0.5 million and in fiscal year 2010, they earned $0.1 million. According to the consolidated balance sheets, Dick’s doubled their cash and cash equivalents. Part of the reason for the increase in the cash was the proceeds from stock options. Dick’s gained of $50 thousand from this option. Another place where Dick’s gained in their cash is in fiscal year 2011, they did not have any repayment of convertible notes as they did in 2010. Between these couple of items and the interest they earned explains how the cash and cash equivalents have been able to increase to double the amount of a year ago. Receivables The accounts receivables of Dick’s consist of amounts receivable from vendors and landlords. Their allowance for doubtful accounts was reduced to $2.9 million in fiscal year 2011 from $4.2 million in fiscal year 2010. Even with lowering the allowance for doubtful accounts, Dick’s managed to maintain their accounts receivables fairly even from fiscal year 2010 to 2011. In 2010, their accounts receivable was $35,435 thousand and in 2011, it was $34,978 thousand. Part of Dick’s receivables is vendor allowances which include rebates and cooperative advertising funds. As the receivables remained the same from one year to the next while the doubtful accounts was lowered, it would seem that the vendors have offered more rebates and advertising incentives to offset the doubtful accounts. Inventory Dick’s inventories are stated at the lower of weighted average cost or market. The cost consists of the direct cost of merchandise including freight. The inventories are net of shrinkage, obsolescence, and other valuation accounts and vendor allowances totaling $75.2 million in fiscal year 2011 and $76.0 million in fiscal year 2010. Dick’s Sporting Goods, Inc. was able to maintain the quantity of saleable merchandise over the last two years. What this means, is what they have been selling, they have been replacing at an even rate to make sure the inventory is sufficient to guarantee sales to the customers. This is backed up by reviewing the accounts payable from both fiscal years as it too has remained close. Granted, inventory is not the only items listed in the accounts payable, but it would be the greater piece of this account. As Dick’s does not manufacture any of their inventories, they must purchase all of it, including the items with their name on it. Conclusion In this economy, Dick’s Sporting Goods, Inc. has been able to maintain their cash and cash equivalents, receivables, and inventories. By keeping things steady they are not growing, but are still holding their own and providing their customers with product. By studying their audited financial statements a person could conclude that if Dick’s were to run into problems, they have enough inventory to sell to bring up their cash. Also with the no repayment of convertible notes, the cash and cash equivalents should remain at a steady growth rate. Another point made in this paper was the receivables have remained steady over the last two years. Even though the doubtful accounts has been reduced from one year to the next, the vendors have picked up their pieces to help maintain this at the rate it has been in the past. Dick’s has also kept their inventory levels even over the last two years, meaning they have found the right product mix to keep customers coming back and spending money. References New York Stock Exchange, (2012). Listing DKS – Dick’s Sporting Goods, Inc. Retrieved fromhttp://secfilings.nyse.com/filing.php'doc=1&attach=ON&ipage=7490474&rid=23