The increase in revenues of Collins Foods Ltd by 29.7% is an indication that the company is performing well. Increased revenues is an implication that the company experienced an increase in sales volume, and the management was committed to ensuring the costs of production are properly managed. The costs of managing the organization include the variable and the fixed costs (Cornell and Shapiro, 2007). It is the variable costs that do imply that the management has the right strategies of ensuring that the organization is in a position to manage the costs of production better. Considering the fact that the variable costs are usually associated with labour costs, raw materials and the other factors of production that are necessary for the production process. The success in the management of the variable costs determine the profits of the company as the financial profits are determined by the total revenues less the costs of production. On the other hand, the fixed costs of production are said to remain constant hence they do not have significant effects on the changes of profits. Collins Foods Ltd seems to have been managing the variable costs to achieve. As a result, an increase in sales and decrease in costs of production lead to increase in the profits.
Besides, the increase in the profits of in Collins Foods Ltd is an indication that its products are becoming competitive in the market leading to increasing in the sales volume. Collins Food Ltd seems to have competitive strategies that have made the products competitive leading to an increase in demand. This is because the company experienced an increase in sales that led to the increased profits. Also, the management of the company must have improved the costs controls to ensure that the organization managed its costs in a better way (Cornell and Shapiro, 2007). Collins Foods Ltd must have employed the use of technology to increase its efficiency in the operations leading to automation of most of its operations. The increased use of the technology can be the major contributor to the increased profits as the costs can be better managed using technology. Besides, the company might have used technology to ensure that the products have innovative features that can make the products competitive in the market.
Many sections seem to emphasize on the EBITDA as it is very important in the process of analysing the performance of Collins Foods Ltd. EBITDA can be taken to refer to the earnings of the organization before deductions that can include interests, taxes, depreciation costs and amortization. EBITDA is mostly used in the process of communicating the financial performance of the company, as it is closed related to the cash flow of the organizations (Higgins and Reimers, 2005). It is from the EBITDA that the costs of the organization are deducted to obtain the final profits after the other costs apart from the costs associated with the factors of production are deducted. Besides, EBITDA is usually subjected to various adjustments associated with the accruals of accounts that are crucial in determining the final financial position of Collins Foods Ltd such as debtors’ valuation.
The use of EBITDA can assist in obtaining a truer cash flow estimation of the company as the estimation of the depreciation costs and amortization among other non-cash costs are subject to judgment. As a result, EBITDA can be used to ensure that the potential errors in the process of making the judgment about these costs are avoided hence ensuring a much accurate financial performance report. The use of EBITDA can be crucial in analysing the effects of costs such as depreciation on the performance of an organization (Higgins and Reimers, 2005). This can be an important way of making the company realize the need to ensure that the manageable depreciation costs are managed by coming up with the most appropriate ways of managing and measuring depreciation. Lastly, EBITDA has proved to be useful in the process of making comparisons with other companies where Collins Foods Ltd stand better position in the process of measuring how it has been performing in the industry as compared to the other companies operating in the same industry.
Collins Foods Limited is likely to experience growth in the future. My thought for the future growth of the company is based on the fact that the management of the company has been coming up with the right strategies for making the company competitive in the market. The company has strategies that have been geared towards making its products meet the expectations of the customers better than those of the competitors. Such strategies can entail the innovative strategies that the company has been using in the process of designing new and unique product features (Chung and Pruitt, 2004). The uniqueness of its products has made the company able to realize an increase in the sales volume as the products demand has increased as they can meet the needs of the consumers. Besides, according to the current financial performance of Collins Foods Ltd, it is clear that the company has strategies that are geared towards managing the costs of the organization.
According to the improvements in the performance that the company has been experiencing, it is clear that it has innovative internal costs controls that can ensure that the costs of operating the organizations are reduced leading to increasing the profits. Also, the company seems to have been incorporating technology into its operations hence making it possible to realize increased efficiency in the utilization of its resources that can improve the organizational performance. Also, the company has been keeping pace with the industry trends making its products remain relevant in the market. As a result, if the company continuous changing its strategies with the changes it is likely to experience sales growth in the future leading to continued increasing the profits.
The use of EPS as a performance measure is considered critical in the process of measuring organizational performance. Through the use of EPS the efforts that Collins foods has been putting in the process of maximizing the wealth of the shareholder. In the case of a decrease in the EPS, that is an indication that the company has been performing poorly as the total earnings of the company are low (Higgins and Reimers, 2005). This can be attributed to various factors that can include poor strategies that cannot compete well with the company. Also, it can imply that the company is experiencing an increase in the costs of production and decrease in the sales volume.
EPS communicates the earnings that the shareholders receive per each share that they have invested. An increase in the EPS is an indication that the company experiences an increase in profits as earning per share increase if the profits are high and decrease the moment the profits are low. This is based on the simple concept that earning per share is equivalent to total earning dividing by the number of shares (Cornell and Shapiro, 2007). Earnings per share of any organization can be used to communicate whether the organization has been experiencing an increase in the profits after the relevant deductions have been made such as depreciation and taxes among other costs.
I did not realize any evidence showing that the performance metrics of the Collins Foods Ltd being played with. My response concerning whether the managers have been enriching themselves is based on the fact that Collins Foods Ltd has experienced an increase in profits. This is an indication that the management of the company has been committed to ensuring that the wealth of the shareholders is maximized. For instance, the growth in the profits of 29.7% makes me believe that the company management has been formulating and implementing strategies that can ensure that the organizational performance is improved. If at all the managers were enriching themselves, the company could not have been experiencing growth in the profits (Cornell and Shapiro, 2007). Therefore, the improvement of the company is a clear indication that the managers have been managing the organizations based on the interests of the shareholders but not their interests.
Chung, K.H. and Pruitt, S.W., 2004. A simple approximation of Tobin’s. Financial management, pp.70-74. Retrieved from
Cornell, B. and Shapiro, A.C., 2007. Corporate stakeholders and corporate finance. Financial management, pp.5-14. Retrieved from
Higgins, R.C. and Reimers, M., 2005. Analysis for financial management (No. s 53). Chicago, IL: Irwin.