SEC 10-K: https://www.sec.gov/ix?doc=/Archives/edgar/data/89800/000008980021000010/shw-20201231.htm
Requirements: answer the following questions after each week and should be 100 words for each. In addition, create an introduction and a summary that is 100 words each. Everything is based on the SEC 10-k report at the above link.
Introduction: 100 words
Summary: 100 Words
Wk1:
1. What does your company produce?
2. Analyze the trends in sales, cost of goods sold, gross profit, and operating income for your manufacturing company.
3. What segments does your company have? Are they by product or by region? What note number in the SEC 10K financial statements notes did you locate this information?
Prepare a trend analysis for percentage changes from a base year for these key indicators of performance.
Comment on cost management issues based on your analysis of these trends?
3. Report on segments, divisions, or any other reporting entities and on any diversity in products.
Founded in 1866, The Sherwin-Williams company manufacture, develop, distribute, and sells paints, coating, and other related product. The products vary in different brands such as Krylon, Valspar, Sherin-Williams, Cabot, and Minwax (SEC 10-K, 2020). These products are sold to industrial, professional, commercial, and retail customers based in South and North America inclusive of the Caribbean region, Australia, Europe, and Asia.
Trend analysis
2020 2019
Net sales $8,149,719 $7,986,252
Cost of goods $4,448,450 $4,363,774
Gross profit $3,701,269 $3,622,478
Operating Income $1,782,698 $1,595,952
2020 Net sales index number = $8,149,719/$7,986,252= 1.02 or 102%
2020 Cost of goods index number = $4,363,774/ $4,448,450= 0.98 or 98%
2020 Gross profit index number = $3,622,478/ $3,701,269= 0.98 or 98%
2020 Operating income index number = $1,595,952/ $1,782,698= 0.90 or 90%
Over the 2020 year, there was an increase in the company net sales, cost of goods, and company’s gross profit. However, the operating income was high considered with the base year.
The company reports its segment internally as the management (SEC 10-K, 2020). This is done to ensure there is a better assessment of the performance and decision when allocating resources. The company has three operating segments; the performance coating group, the American group, and the consumer brand group. Due to the company’s diverse operations, the segment is based on product since the company operating decision maker allocates resources based on the segment profit or loss and cash gained in the process (SEC 10-K, 2020). However, this report was retrieved from Note 21- Reportable segment information.
Trend analysis
2020 2019
Operating Income $1,782,698 $1,595,952
2% change of Operating income= $1,595,952-$1,782,698/ $1,782,698= -0.105
The operating income of the company increased in the year 2020. This shows a negative trend analysis that was below 100%. Although the company had an improved sale, the high rate of spending may lead to different management issues. This was characterized by the Covid-19 pandemic with the degree of effectiveness affecting direction and production.
When reporting in the segment, the company considers the management structure, nature of business activities, information given to the board of directors, and administrating activities (SEC 10-K, 2020). The company also allows customers that are significant to some portion of production to report on related profitable segments. These segments are incurred in company capital expenditure with related internal and external environments.
References
SEC 10-K: (2020). UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Inline XBRL Viewer. Retrieved January 22, 2022, from https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F89800%2F000008980021000010%2Fshw-20201231.htm
Question to Answer (100 words): Any discussion of why the increases during the pandemic?
Wk2:
1. Inventory disclosures:
Are there any disclosures about raw materials, WIP inventory, Finished Goods inventory levels?
How is inventory described for your SEC 10-K company? Relate your answer to topics in our course.
Report on any costing information such as inventory valuation methods–LIFO, FIFO, and/or average cost.
Comment on supplemental information provided related to inventory for your SEC 10-K company.
2. Cost and sources for production materials: Notice how cost is used in the SEC 10-K.
3. Briefly provide an overall SWOT (strengths, weaknesses, opportunities and threats) analysis for your manufacturing corporation as related to cost accounting-related topics. Although details are high level in the SEC 10-K filing, what do you learn related to operations and strategy?
1, a. Disclosures about raw materials, WIP inventory, and Finished Goods inventory
The Sherwin-Williams Company has inventory disclosures about finished goods, raw materials, and WIP inventory. Inventory was stated at a minimum level of the cost and the net realizable value. The primary cost was determined through the last in, first-out (LIFO) method. In 2020, finished goods were 1,427.6 million dollars while the work in process and raw materials were $376.5 million (SEC, 2020). Where the values were increasing, there was positive income in the level of sales despite the pandemic affecting the company’s production and distribution.
1, b. How inventory is described in The Sherwin-Williams company
The company views the changes of the previous year in comparing the current period. The company summarized the inventory through the LIFO cost method (SEC, 2020). After the summary presents the effect of the intended inventories that the company had used through the First in, first-out (FIFO) evaluation method. The percentage is determined through excess determining of FIFO over LIFO in overall inventories of the current year and the base year.
1, c. Cost information through LIFO and FIFO valuation method
Sherwin-William’s company value of the overall inventory would be approximately $2,116,200 on 31st December 2020 when using the FIFO inventory valuation method. However, if the company used the LIFO method to value the inventory in the same period, the inventory would be $1,804,100 (SEC, 2020). This would have been $312,000 more than the intended one if the FIFO method was used instead, as reported on 31st December 2020.
1, d. Comment of the supplemental information
The company had recorded a reserve for obsolescence of $125.8 million (SEC, 2020). This was meant to reduce the inventories and their estimated realizable value. When the company reviews its process in meeting the set valuation, different measures must be implemented. Older inventory must be sold. If the inventory cost rises or is likely to increase over the period, the LIFO method could favor the company. However, despite the factors such as covid-19 affecting the company’s overall production, the overall inventory cost was lower than expected.
2. Cost and Sources for production material in Sherwin-William company
The Sherwin-William company suppliers had an increase in their sales. The sale has increased over the period. With adequate resources such as fuel and coating, there are increased raw material prices for the various segments (SEC, 2020). While there is Covid-19 which disrupts operation, the company enhances shifts in meeting customers’ behavior and preferences. However, the company reduced the spending in various areas such as voluntary and involuntary programs for capital expenditures. Other programs such as share repurchases and discretionary spending were banned to closely monitor the effects of the pandemic, cash flows, financial performance, liquidity, and operations.
3. SWOT analysis for Sherwin-Williams company
SWOT analysis of the Sherwin-William company analyzes the brand in a different form. In the company, strengths and weaknesses are the internal factors, while opportunities and threats exist in the external factor (SEC, 2020). The overall framework is a condonation of the company management who benchmark on a different company and evaluate their performance as compared to competitors. Industrial products and other chemical brands ensure the company meets the target through segmentation, unique selling proposition, and positioning. On the operation and strategy, there is coordination in the company’s different departments to ensure more network and successful return in the act of being a strong dealer community.
Reference
SEC, F. O. R. M. (2020, 31st December). UNITED STATES SECURITIES AND EXCHANGE COMMISSION-THE SHERWIN-WILLIAMS COMPANY. Inline XBRL Viewer. Retrieved 29th January 2022, from https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F89800%2F000008980021000010%2Fshw-20201231.htm#
Questions to Answer (100 words): What would constitute obsolescence in the paint and coatings field? Colors or products that do not meet EPA standards?
Are there any distribution issues?