Financial Management

Case 2 “ Getting too Big for our Boots’

April 27th, 2020

08576726 Joel

08116831 Jeremy

08116911 arno

06910023 kratai

1.

2. should do a ratio analysis, whch allows comparison with competitors and own past numbers. Additionaly
it can be used to show other, their growth/value changes especially banks for future financing. The DuPont
Analysis should be added to the Report as well. The DuPont Analysis uses ratios and calculates further to
obtain other ratios which contain informations about the operating efficiency and their costs, their asset
use ef He ciency by their management and their equity rentability by measuring the financial leverage. The
common size analysis should be added as well to see the company size in ration to their total assets.The
common size income statement analysis indicates the following
Cost of Goods sold increased from 81% to 86%
Miscellaneous expense increased from 0.3% to 1.5%
interest charges increased from 2.9% to 3.6%
selling and administrative expenses increased from 5% to 6%
As we can see a majority of the company’s cost have gone up, the company may need to take a look in to all
its costs and do a possible restructure.

Common size balance sheet analysis results had similar findings with its inventory and accounts receivable
accounts going up significantly however the cash balances have decreased. With more short and long term
borrowing the company’s debt is relatively larger that its total assets which resulted also in a decrease in
total equity from 32% to 28%

Results from the Du Poet analysis indicates a negative ROA and has been declining ever since. The ROE has
also been declining possibly due to the drop in net profit margin.
5.

 2011 2012 2013 2014 2015

Liquidity RaWos:
Current RaWo 6.38461538461539
3.68042912469024
3.56153446204782
3.61508632628566
3.78924844547985
Quick RaWo 2.53846153846154
1.99929641482884
0.573409271554841
0.614440033237928
0.615023154839843
Cash RaWo 2.38461538461538
1.92457940550166
0.453884263935122
0.166339673160373
0.104437680321504
asset uWlizaWon
Inventory Turnover 2.916 2.97 1.92456 2.1168 2.33035714285714
Days sales inventory 125.17146776406
122.895622895623
189.653739036455
172.430083144369
156.628352490421
receivables turnover 90 81.875 58.5 16.8750724376392
16.8749750216479
payables turnover 72.9 76.3278126784695
48.1188118811881
68.8175054704595
77.7016969336112
days sales receivables 4.05555555555556
4.45801526717557
6.23931623931624
21.6295367826618
21.6296616458254
days cost in payables total asset trunover 5.00685871056241
4.78200523756079
7.58539094650206
5.30388303825804
4.69745210727969
total asset turnover 1.40625 1.24194317019741
1.17476012803881
1.34196296903162
1.56949849406765
capital intensity 0.711111111111111
0.805189821882952
0.851237606837607
0.745177045177045
0.637146199107406
long term solvency
total debt raWo 0.474009375
0.545577734265876
0.636909758340797
0.646501720465345
0.643695476420827
debt equity raWo 1.90117456941367
2.20059639547919
2.75413625943327
2.8288680819505
2.80658799937406
equity mulWplier 1.90117456941367
2.20059639547919
2.75413625943327
2.8288680819505
2.80658799937406
Wmes interest earned raWo 2.75675806451613
2.70780166435506
3.25587371512481
1.38856925996205
0.922478771454381
cash coverage raWo 3.96643548387097
4.09476421636615
5.09140969162995
2.33733586337761
1.82582113821138
Profitabilty RaWos
profit margin 0.0363063333333333
0.0300781679389312
0.0315128205128204
0.00937619047619048
-0.0016936655298724
roa 0.05105578125
0.0373553752438063
0.0370200050605051
0.0125825004096346
-0.0026582054985890
roe 0.0970659529340471
0.0822041041132927
0.10195813826154
0.0355942337999444
-0.0074604876522101

A possible argument that could be made for the loan is the increasing liquidity or current ratio and
total asset turnover.

6. Due to the company’s profitability and poor cash flow situation, i would not grant the loan.
However, i can tell him that if he can demonstrate improvement and better profits in the next 2
quarters, we would consider it again

7. The company needs to continue to improve credit collection policies and inventory
management. Considerations of sales and other miscellaneous casts should be considered and
reduce into more in line with its level by level. Which is will help to increase the company’s
liquidity and profitability.