Transcription of Chapter 2: Analyzing a Dealership’s Financial Statements ...
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Chapter 2: Analyzing a Dealership’s Financial Statements ...
41 Chapter 2: Analyzing a Dealership s Financial Statements & OperationsTo analyze a dealership s operations, a close look must be taken at the dayto day operations as well as examining the dealership s Financial more emphasis is placed on Financial ratio analysis. However, Financial Statements offer only figures. Many times more insight can begained by simply walking through the acts to drive profit margins and the returns on investmentdown to a free market minimum level. In other words, competition translatesinto lower prices. Therefore, in the long run, the analysis of profit margins(which is a component of return on equity) will depend upon the analysis of afirm s competitive position as well as the competitive position of the industry inwhich it factors determine the choice of a competitive strategy: (1)The long-term profit outlook for the auto-dealership industry.(2)A firm s competitive position within the auto-dealership industry.
Analyzing a Dealership’s Financial Statements & Operations 42 (4) Bargaining power of buyers (5) Bargaining power of suppliers These pressures are presented in Figure 2-1. Figure 2-1: Five Basic Competitive Forces Facing an Auto Dealership
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