Final Statement Analysis

Financial Analysis of the Polaris Industries Inc.
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Financial Statements Analysis of the Polaris Industries Inc.
Introduction
Financial statements analyses refer to the reviewing and evaluation of the financial statements of a company with a view of understanding the financial health of the company and hence help in decision making on the management and running of the company. Through conducting a comprehensive financial statements analysis, the viability, profitability and the stability of a company can be assessed. A company may also conduct financial statements analysis to understand its competitors. The Polaris Industries Inc. is an American company based in Minnesota, and its main business activities are the manufacture of snowmobiles, neighborhood electric vehicles, and ATV. The financial statements analysis of this company will be used to determine its market position and creditworthiness.
Financial analysis

As seen in the analysis of the income statement, both in the vertical and horizontal analysis, a trend can be observed. The sales in the fiscal year 2016 are reduced by an overall 4.3%.This indicates that there is a slump in the economy. This could be due to factors such as increased inflation, development of similar products by competitors or the decline in consumer confidence on the products of the company (Polaris Industries Inc., 2018).
The gross profit of the company went down by 17.4%.This is partly due to the decline sales of the company and related factors.

Consequently, if operating expenses of the company are not reduced, the company will most likely have a lower net profit in its books of accounts. This is clearly evident in the horizontal analysis of the income statement where the net income in the fiscal year 2016 reduces by a whopping 53.3% (Polaris Industries Inc., 2018).
The cash and cash equivalents of the company reduced by 17% in the fiscal year 2016.However, a significant increase in the inventories and accounts receivables was observed. The decrease in the cash and cash equivalents can be attributed to the reduced sales in the fiscal year 2016.From the balance sheet, it is noted that the current liabilities of the company also increased in the fiscal year 2016 (Polaris Industries Inc., 2018).
The shareholder’s equity in the company also reduced by 11.75 in the fiscal year 2016.This can be attributed to a decline in retained earnings by shareholders. If the income of the company increases more than the shareholder’s equity, then the return on equity will most likely go up. Since in the fiscal year 2016 there was no increase in net income, the return on equity, reduced from 46% in the fiscal year 2015 to 24% in the fiscal year 2016 (Polaris Industries Inc., 2018).
Liquidity ratios measure the ability of the company to settle short-term debts using cash and cash equivalents only. The cash ratio in 2016 fiscal year was 1.24, and in the fiscal year 2015, it was 1.83.This decline in the cash ratio can be attributed to the reduction in sales (Polaris Industries Inc., 2018).
The return on equity in the fiscal year 2016 was 24% compared to 46% in the fiscal year 2015.This should concern the shareholders (Polaris Industries Inc., 2018). However, the ROE is still some way above the 15-20% threshold, considered as an attractive ROE. The Altman’s Z- score of the company is roughly 2.62, and hence it is in the safe zone and creditworthy (Polaris Industries Inc., 2018).
Conclusion
The company, as shown in the financial statements analysis is financially healthy in many aspects despite the negative slump in the revenue of the company in the financial year 2016.With proper market strategy, the company can still peck, and its business activities return to normalcy.
References
Polaris Industries Inc., (2018).Form 10-k.Retrieved from: http://d18rn0p25nwr6d.cloudfront.net/CIK-0000931015%20/6858f10b-eeca-4ff4-a90e-36e176804ee1.pdfPolaris Industries Inc., (2018).SEC filings. Retrieved from: http://ir.polaris.com/investors/financial-information/default.aspx
Appendixes
Financial statements analysis
POLARIS INDUSTRIES INC.
Horizontal analysis of the balance sheet
For the years ended 31st December 2016&2015
Year Amount Amounts in million $ 2016 2015 Increase/(decrease) Percentage (%)
ASSETS
Cash and cash equivalents 127.3 155.3 28 18.0
Trade receivables, net 174.8 150.8 24 15.9
Inventories, net 746.5 710.0 36.5 5.1
Prepaid expenses 91.6 90.6 1 1.1
Income taxes receivable 50.7 46.2 4.5 9.7
Current assets 1,191.0 1,512.9 321.9 21.3
Property and equipment –net 727.6 650.7 76.9 11.8
Investment in finance affiliate 94.0 99.1 215.1 5.2
Deferred tax assets 188.5 166.5 22 13.2
Intangible assets 793.0 236.1 556.6 235.9
other long term assets 105.6 80.3 25.3 31.5
Total assets 3,099.6 2,385.7 713.9 29.9
LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities 959.8 826.8 133 16.1
Long term income taxes payable 26.4 23.4 3 12.8
Long term debt 1,138.1 456.4 681.7 149.4
long term liabilities 99.6 87.9 11.7 13.3
Total liabilities 2,223.8 1,394.5 829 59.4
Deferred compensation 8.7 9.6 0.9 9.4
Shareholders’ equity 867.0 981.5 114.5 11.7
Total liabilities and shareholders’ equity 3,099.6 2,385.7 713.9 29.9
POLARIS INDUSTRIES INC.
Income statement horizontal analysis
For the years ended December 31 2016&2015
2016-(million $) 2015-(million $) increase/decrease (millions $) percentage %
Sales 4,516.6 4,719.2 202.6 4.3
Cost of sales 3,411.0 3,380.2 30.8 0.9
Gross profit 1,105.6 1,339.0 233.4 17.4
Operating expenses 833.8 692.2 141.6 20.5
Income from financial services 78.5 69.3 9.2 13.3
Operating income 350.3 716.1 365.8 51.1
Non-operating expense 37.0 30.4 6.6 21.7
Income before taxes 313.3 685.7 372.4 54.3
Provision for income taxes 100.3 230.4 130.2 56.5
Net income 212.9 455.4 242.5 53.3
POLARIS INDUSTRIES INC.
Income statement vertical analysis
For the years ended December 31 2016&2015
2016-(million $) 2015-(million $) percentage %(2016) -denominator is sales percentage %(2015) -denominator is sales
Sales 4,516.6 4,719.2 100.0 100.0
Cost of sales 3,411.0 3,380.2 75.5 71.6
Gross profit 1,105.6 1,339.0 24.5 28.4
Operating expenses 833.8 692.2 18.5 14.7
Income from financial services 78.5 69.3 1.7 0.1
Operating income 350.3 716.1 7.8 15.2
Non-operating expense 37.0 30.4 0.8 0.6
Pretax income 313.3 685.7 6.9 14.5
Income tax 100.3 230.4 2.2 4.9
Net income 212.9 455.4 4.7 9.7
POLARIS INDUSTRIES INC.
Vertical analysis of the balance sheet
For the years ended December 31st 2016 &2015
Assets Amounts in millions $ 2016 2015 % %
Cash and cash equivalents 127.3 155.3 4.1 6.5
Trade receivables, net 174.8 150.8 5.6 6.3
Inventories, net 746.5 710.0 24.1 29.8
Prepaid expenses and other 91.6 90.6 3.0 3.8
Income taxes receivable 50.7 46.2 1.6 1.9
Current assets 1,191.0 1,512.9 38.4 63.4
Property and equipment less depreciation 727.6 650.7 23.5 27.3
Investment in finance affiliate 94.0 99.1 3.0 4.2
Deferred tax assets 188.5 166.5 6.1 7.0
Goodwill and other intangible assets 793.0 236.1 25.6 9.9
other long term assets 105.6 80.3 3.4 3.3
Total assets 3,099.6 2,385.7 100.0 100.0
LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities 959.8 826.8 31.0 34.7
Long term income taxes payable 26.4 23.4 0.9 1.0
Long term debt 1,138.1 456.4 36.7 19.1
Long term liabilities 99.6 87.9 3.2 3.7
Total liabilities 2,223.8 1,394.5 71.7 58.5
Deferred compensation 8.7 9.6 0.3 0.4
Shareholders’ equity 867.0 981.5 28.0 41.2
Total liabilities and shareholders’ equity 3,099.6 2,385.7 100.0 100.0
FINAANCIAL RATIOS
LIQUIDITY RATIOS 2016 2015
Current ratio 1.24 1.83
Quick ratio 1.1 1.23
Cash ratio 0.41 0.49
PROFITABILTY INDICATOR RATIOS Gross profit Margin 25% 28%
Net profit margin 22.30% 26%
RETURN ON ASSETS(ROA) 6.87% 19.07%
RETURN ON EQUITY 24.56% 46.40%
RETURN ON CAPITAL EMPLOYED 10.62% 31.67%