Financial Analysis of Green Pastures: Case Study Report

This report presents a financial analysis of Green Pastures, a farm specializing in boarding broodmares. The analysis focuses on the company's financial performance, particularly in light of a downturn in the thoroughbred industry and increased competition. The report examines the static and flexible budgets, calculates and analyzes variances, and discusses the impact of these variances on managerial decision-making. Key areas of focus include the reduction in net income, the impact of changes in boarding fees and days, and the effectiveness of management decisions regarding expenses and operational costs. The report uses the provided budget report and case study details to assess the financial health of the company and identify areas for improvement, emphasizing the importance of effective budgeting and cost control in maintaining profitability.

Running head: FINANCIAL ANALYSIS
FINANCIAL ANALYSIS
Name of Student
Name of University
Author’s Note

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FINANCIAL ANALYSIS
Table of Contents
PRIMARY CAUSES FOR LOSS IN NET INCOME:..................................................2
MANAGEMENT’S JOB:..............................................................................................2
MANAGEMENT DECISIONS:....................................................................................3
PRIMARY CAUSES FOR LOSS IN NET INCOME AS BUDGETING:...................3
MANAGEMENT DECISSIONS:..................................................................................3
Decisions Making Process.............................................................................................4
REFRERENCES:...........................................................................................................5

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FINANCIAL ANALYSIS
PRIMARY CAUSES FOR LOSS IN NET INCOME:
There are several reasons behind the reduction of the net income of the company. One
of the moist notable reason due to which the net income of any company decreases is due to
the reduction in the sales revenue. Due to the increase in the cost of goods sold, net income of
the company can also be reduced. When there is a rise in the fixed expenses like advertising
and entertainment expenses then also the net income of the company decreases. The same
thing occurs when the variable expenses of the company increases. The increase in interest
expense also causes reduces the net income of the company (Chapman, et al., 2014). There
might be4 other reason also that are responsible for the reaction in the net income of the
company. Thus, it is essential for the management to check the variable expenses as well as
the fixed expenses, so that the net income of the company increases by considerable means.
MANAGEMENT’S JOB:
As per the analysis it can be stated that the management of the company were not able
to manage the company properly. The management were failed to identify the main reason
behind the decrease in the economic condition of the company. They were also failed to
reduce the variable expenses, which ultimately affects the financial health of the company.
The decisions to reduce the boarding fees was not an good idea as it effect the business
severely (Boardman et al., 2017). The decision to reduce the boarding days by the
management also found to be harmful for the company, as it is one of the main reasons that
affected the financial health of the company. The only thing that the management did good
was to reduce the fixed coast of the company. Thus, the management were failed to take right
decisions which actually harmed the financial health of the company.

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FINANCIAL ANALYSIS
MANAGEMENT DECISIONS:
The decisions of the management can be stated as the completive sound decisions
because the reduction in the boarding fees and days gave competitive advantage to the
company. The reduction in the fixed expenses were also one of the major reasons der to
which the reduction in the net income stayed still (Ahmed et al., 2016). If the management
were able to reduce the variable expenses then the company were able to attract more
customers, which ultimately bring high percentage of profit margin. Thus, it can be
determined that the management decisions of the company became fruitful for the company,
as they can gain competitive advantage in the market.
PRIMARY CAUSES FOR LOSS IN NET INCOME AS BUDGETING:
The net income of the company decreased due to the reduction in the boarding fee of
the company. The reason behind the reduction of net income is due the reduction in the
number of boarding days, which dropped almost by 13%. As per the analysis the boarding fee
reduced from $25 to $20 ($547,500 ÷ 21,900 days) per day. The estimate reduction of
the boarding fee is 20%. Both the decrease in boarding days and boarding fee are the real
cause for the decrease in the sales revenue of the company (Zakeri & Syri, 2015). As per the
case study it can be determined that the sales revenue decreased to $167,500, which is
approximately by 31%.
MANAGEMENT DECISSIONS:
As per the analysis it can be determined that the management of the company was
unable to control variable expenses. The boarding days reduced by 13%, which should
actually decline by 7.4% ($14,330 ÷ $192,720). Thus, it can be analysed that the management
department of the company did an awful job in maintaining the variable expenses of the
business. On the contrary, the management was successful in regulating the fixed expenses of

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FINANCIAL ANALYSIS
the company. The fixed expenses budget of the company was $4,000. The fixed expenses
also include additional expenses that are mainly incurred from the advertisement and
entertainment. As the fixed expenses are greater than the variable expenses, which is the
reason that the total expenses are quite high for the business.(Babashamsi et al., 2016). Thus,
the decisions of the management tend to become fruitful, which ultimately increases the
profit margin of the company.
Decisions Making Process
The management of Green Pastures needs to focus on its breeding
programs so that more mares can be developed and this would have a
positive effect on the income which is generated by the company. The
higher officials of the entity also need to reduce the costs of operations
which would also enhance the profits of the business.

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FINANCIAL ANALYSIS
REFRERENCES:
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Babashamsi, P., Yusoff, N. I. M., Ceylan, H., Nor, N. G. M., & Jenatabadi, H. S. (2016).
Evaluation of pavement life cycle cost analysis: Review and analysis. International
Journal of Pavement Research and Technology, 9(4), 241-254.
Boardman, A. E., Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2017). Cost-benefit
analysis: concepts and practice. Cambridge University Press.
Chapman, R. A., Somani, B. K., Robertson, A., Healy, S., & Kata, S. G. (2014). Decreasing
cost of flexible ureterorenoscopy: single-use laser fiber cost analysis. Urology, 83(5),
1003-1005.
Zakeri, B., & Syri, S. (2015). Electrical energy storage systems: A comparative life cycle cost
analysis. Renewable and sustainable energy reviews, 42, 569-596.