978-0073526898 Case Overstock Slides Part 2

subject Type Homework Help
subject Pages 9
subject Words 283
subject Authors Richard Sloan, Russell Lundholm

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page-pf1
Sales Growth
Growth rate in GAAP basis sales = 238.9/91.8
= 160%
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GAAP Basis vs. Gross Basis Gross
Profit
Income Statement - Annual
Overstock.com Inc. As Reported Gross
OSTK 69037010 NASDAQ Natl Market
Internet Retail
12/31/03 12/31/02 12/31/03 12/31/02
Restated as of:
Source Document: 10-K 10-K 10-K 10-K
Direct Revenue 136.6 77.9 136.6 77.9
Less: sales, returns and discounts (16.0) (11.7)
Total Revenue 238.9 91.8 278.8 142.8
Cost of Sales
213.5 73.4 253.4 124.4
Gross Profit
25.5 18.3 25.5 18.3
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Gross Profit Growth
Growth rate in GAAP basis gross profit
= 25.3/18.3 = 39%
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GAAP Basis vs. Gross Basis
Common Size Income Statements
Income Statement - Annual COMMON SIZE
Overstock.com Inc. As Reported Gross
OSTK 69037010 NASDAQ Natl Market
Internet Retail
12/31/03 12/31/02 12/31/03 12/31/02
Cost of Sales
89.3% 80.0% 90.9% 87.2%
Gross Profit
10.7% 20.0% 9.1% 12.8%
Sales/Marketing 8.4% 9.4% 7.2% 6.1%
General/Admin. 7.1% 11.8% 6.1% 7.6%
Goodw ill Amort. 0.0% 0.0% 0.0% 0.0%
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Accounting Performance vs.
Economic Performance
Overstock.com is ‘investing’ significant
amounts to fuel sales growth, customer loyalty
and brand awareness. Most of these amounts
must be immediately expensed for accounting
purposes:
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distortions to sales growth rates and profit margins.
Make sure you are aware of such distortions before
interpreting the information in the financial statements
GAAP requires the immediate expensing of many
expenditures that are potentially investments that could
Overstock.com:
Ratio Analysis
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Trade-Off 1:
Internet versus Bricks and Mortar
0%
5%
10%
15%
20%
25%
30%
35%
0 1 2 3 4 5 6 7 8 9 10 11
Profit Margin
ROE=10%
ROE=20%
Bricks and Mortar
Internet
page-pfa
Trade-Off 2:
Liquidation versus Regular Retail
0%
5%
10%
15%
20%
25%
30%
35%
0 1 2 3 4 5 6 7 8 9 10 11
Turnover
Profit Margin
ROE=10%
ROE=20%
Liquidation

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