Yankee Candle Company

Yankee Candle Company

History

A simple gift from a young man to his mother is responsible for the birth of a successful company. That young man was Mike Kittredge he melted crayons to create a candle for his mother for Christmas. The creation was an instant hit with friends and neighbors and he found it difficult to keep up with the demand. The result of that simple gift to his mother turned into a multimillion dollar company.

In 1969, a young man made a special gift for his mother; in 1999 the Yankee Candle Company became a publicly traded company on the New York Stock Exchange (NYSE). The company presently owns over 17,500 locations worldwide. (Hoovers, 2007) The Yankee Candle Company is quite an accomplishment from the meager beginnings in the kitchen of Mike Kittredge's parents South Hadley Massachusetts home.

The candles produced by this company are known for their longevity and there unique aromas that permeate the space in which they are burned. In some homes the candles have become a tradition. Macintosh Apple scent burnt in autumn, Pumpkin Pie at Thanksgiving or Mistletoe at Christmas, what ever the occasion or mood Yankee Candle has a scent that is appropriate. It is almost impossible to believe that a melted box of crayons started it all.

Uniqueness is what differentiates the Yankee Candle Company from its competitors. Their three top competitors are Bath & Body Works, Blyth, and Lancaster County. The top three competitors do not specialize in candles but offer a plethora of other products to the selective consumer.

Ratios

The following are the computations of the financial ratios for Yankee Candle Company, Inc. All figures are compiled from fiscal reports from 2006 and 2005.

The current ratio:

current assets/ current liabilities = current ratio

1,833,683/104,104= 17.61

Inventory turnover ratio

cost of goods sold/ average inventory held

72,981/77,399.5= .9

Accounts receivable turnover

credit sales/ average Accounts Receivable

49.3/40.7= 1.2

Debt to equity ratio

total liability/ total stockholder's equity

104,104/ 381,577= .27

Return on assets

net income/ average total assets

32,198/125= 257.6

Return on equity

net income/invested capital

(36,033)/381,577= 9.4%

Gross Margin on Sales

sales - cost of goods sold/ sales

452,230-241,742/452,230

210,488/452,230=47%

Ratio Indications

The financial ratios of an organization are compared to other companies that it competes with or with the average of similar industries in the same sector. The ratios should not be the only set of data to determine the financial health of an organization as they are only as accurate as the data supplied to make the computations.

Who would be interested in the data?

The current ratio is an indicator of the liquidity of Yankee Candle Company. Yankee Candle Company's current ratio is 17.61 while the industry average for manufacturing of 1.7 shows that the company is very liquid. The current ratio also determines that the organization is very able to pay its debts and obligations. The higher the current ratio of a company the more liquid a firm is and the higher the integrity of that firm. Investors and lenders would be interested in the liquidity of a company.

The inventory turnover ratio for the company is .9. This indicates that the company only sells their entire inventory less than once a year. The industry average is 8.3 for manufacturing and .9 is well below the average. However, for this type of manufacturing the average may be acceptable. Specific numbers for candle and candle accessories manufacturing was unavailable. The inventory turnover ratio would be used by managers and other companies in the same business sector to determine the success of a company. Internal managers can use the data to make adjustments to the company's operating procedures.

Accounts receivable turnover ratios indicates the effectiveness of a company's credit policies. This ratio is also used by management and financial entities to determine the collection procedures of a company. This ratio verifies whether a company is lax or proactive in collection of their accounts receivables.

The debt to equity ratio indicates the financial leverage of a company. Yankee Candle's debt to equity ratio is .27 which indicates that the company is not stymied in debt. This fact is of particular interest to creditors. Before a bank or potential supplier extends credit to another company the benefit of this information will help them make their decision.

The return on assets ratio for company is 257.6 the industry average 9.26. In light of that information it appears that the company is making their inventory work for them. Investors and management both benefit from this knowledge. Essentially, it indicates to management