Stacy Owens

Corinne Anderson
Intermediate Accounting
March 17, 2018

Financial Statement Analysis for Control 4 Corporation

Intro
Founded in 2003, the company mission is to deliver an elegant and more affordable way to
control and automate lighting, music, video, security and energy in a single room or throughout
the entire home. (Control4.com) Control4 aims to make the automated home more
comfortable with an ease of use for the consumer. Control4 Corp. is the recipient of 11 awards
in 2016 and 13 awards in 2017 for top performing products at various consumer electronic
trade shows.
Control4 employs 546 employees word wide. The Draper, Utah location serves as the
Headquarters for Control4. Control4 maintains locations throughout the world, although most
are training facilities and do not generate cash flows.
I will be completing a financial analysis on Control4 Corp. to find out if this company has
investment potential in either the debt or equity sections. I will go through a series of ratios and
calculations to determine the best course of action. I will break up the body of this report into
the different ratio sections explaining how each one could impact the outcome, including
liquidity, efficiency, solvency, profitability and investment potential. I will then have a
conclusion section to bring all of the data together with an investment recommendation.
Body
Liquidity Ratios
Liquidity Ratios are used as a means of calculating how the company pays debt obligations. This
is an important part of determining if this company would make a good investment for the debt
portion or the equity portion. Control4 has a high working capital meaning they have more
liquid assets than debt and would have liquid assets to cover debt if needed. The working
capital calculation is a good indicator of the health of the company in the event that
emergencies arise they would be able to pay debts with capital instead of debt.

Liquidity Ratios
180000 174773.00

160000
136882.00
140000
120000
100000
80000
60000
40000
20000 2.61 0.75 3.75 2.92 1.23 4.10
0
2017 2016

Acid test Ratio Cash Ratio Current Ratio

Solvency

Solvency is another way to determine the debt of a company. Solvency means a company can pay debts
while maintaining day to day operations. Unlike the liquidity of the company that focuses more on the
current assets vs. current liabilities of the company; the solvency of the company focuses more on long
term obligations. The times interest earned ratio having improved over the previous year is a good
indicator that Control4 can pay debt long term.

Solvency

TIMES INTEREST EARNED RATIO

DEBT TO EQUITY RATIO

DEBT RATIO

0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00

2016 2017
Efficiency Ratios

Efficiency ratios help determine the company’s ability to sell through inventory in a timely
manner. Control4 has A days in inventory ratio of 152.66 for 2017, this has actually gone down from the
previous years’ ratio of 174.60. This indicates Control4 is improving on selling through inventory at a
more competitive rate. The accounts receivable turnover ratio calculates how many times in one year a
company collects on accounts receivable. Control4 has an accounts receivable turnover ratio of 1.41 for
the year of 2017 and 1.71 for the year of 2016. This ratio has improved over the previous year, showing
Control4 is now collecting accounts receivables at a faster pace than the prior year.

Efficiency Ratios

INVENTORY TURNOVER RATIO 2.390900142

2.090481541

DAYS SALES IN INVENTORY 152.6621684

174.6009199

ACCOUNTS RECEIVABLE TURNOVER RATIO 1.41

1.71

GROSS PROFIT PERCENTAGE 6.908379748

7.639879574

0 20 40 60 80 100 120 140 160 180 200

Column1 2017 2016

Profitability

Profitability ratios are the most used in creating a financial analysis of a company. This is
especially important in retail based company’s. Control4 has the following profitability ratios.

Return on assets for 2017 was calculated as .08 and for 2016 .07, this shows between the two years
return on assets has improved. Return on assets shows how well a company can turn inventory into a
profit.

Asset turnover ratio shows how well a company can turn assets into sales or revenue, the higher the
number the better. This shows the company uses its assets to gain revenue at a competitive rate.

PROFITIABILITY
7.00 6.53
6.20
6.00

5.00

4.00

3.00

2.00

1.00 0.55 0.43

0.08 0.07
0.00
Profit margin ratio Rate of return on total Asset turnover ratio
assets

2017 2016
For a perspective on the variation of Control4 stock price over the course of two years. On December
30th of 2016 the market price for Control4 stock was $10.20 per share. This price rose to $29.76 the next
year reporting on December 29th 2017. Control4 Stock price as of March 24th 2018 was $22.37. All stock
prices are reflected from the New York Stock exchange online data.

Ticker: CTRL $22.37 (-1.22) as of 03/24/2018

Conclusion

Based on all of the data compiled with liquidity, solvency, efficiency and profitability ratios. I
believe Control4 would be a good candidate to invest in the equity of the company. Control4 has the
liquidity and efficiency to maintain debt with having enough capital to pay debts in the event of an
emergency situation. The profitability and efficiency ratios show Control4 is more profitable each year,
with the efficiency to turn cost of goods sold into profit for the company. Control4 stock has a 52 week
high of 35.76, a low of 14.63. Control4 closed with a stock market price of 22.37 as of March 24th 2017.
This would be concerning without all of the other data provided in the financial analysis of the ratios
calculated.
Reflection

This assignment fits into my field of study being that I am going into Accounting and will likely
use this information to determine facts about companies in the future. I like the idea behind
the assignment in being able to use publicly traded companies to study. I decided to study the
company my husband works for as I have a vested interest in this company. I have been
enlightening since he does own stock in the company. I feel like anyone who would like to learn
more about the stock market should take the time to calculate some of these ratios to make a
more informed decision before a stock market purchase in a particular company. I think that
without working through the ratios and just going off of the stock market pricing a person can
become misinformed about a company. The stock price may be high, but the company could
have a very low working capital meaning they would not be able to withstand an emergency
situation.