MGMT 2620 Business Analysis & Valuation Case Assignment Answer

Forecasted Statements

The forecasted statements are as follows:-

Ratio Analysis Compare and Contrast

The ratio analysis of the company is as follows:-

Table: Ratio Analysis Calculation

The calculation reflects that the organization has performed well in comparison to the industry. An assessment of a company's liquidity can be carried out to determine whether or not it holds sufficient current assets to pay its immediate financial obligations. Coverage analysis is used to determine whether or not a business is able to meet its financial responsibilities, such as paying its interest, fees, and other expenses, but not its capital obligations. Instead of relying on people's personal experiences or opinions, the examination of financial ratios is founded on quantitative data (Bustani, Khaddafi & Ilham,.2022).. Financial ratios completely avoid discussing a number of important issues that have the ability to have a substantial impact on the path that a company's development will take. For example, it is unable to determine the level of expertise with which they handle the operations of their business. The analysis of financial ratios, despite the fact that it has a great deal of practical value, offers only a fragmentary representation of the bigger picture. When looking at a firm's Current Ratio, it is important to note that if it has decreased, this may be an indication of possible financial trouble or even insolvency inside the organisation. On the other hand, a Current Ratio that is overly high shows that there is an abundance of unused funds, which could potentially lead to a reduction in the company's profitability. This suggests that the assets can be hastened and provide larger profits, which in turn indicates enhanced utilisation of general assets for the development of sales. To put it another way, if the Total Assets Turnover grows, it is possible for the sales volume to also increase, provided that the assets do not change. It can be said that the company has performed well in terms of its working capital cycle, due to which its current and quick ratio is on the higher side (Mosteanu & Faccia, 2020).

Return on Equity seems to be the most appropriate performance indicator to use when analysing the business that is the subject of this inquiry, based on the descriptions that have been provided. The previously conducted research has produced a wide range of results. The investigation of the underlying aspects that are thought to have an effect on the performance of a firm is not only interesting but also important. The liquidity ratios, the debt, the activity, and the profitability are the major aspects that are considered while making forecasts for the latter. suggestive of the cash ratio is the current ratio, suggestive of the leverage ratio is the debt to equity ratio, and indicative of the activity ratio is the total assets turnover ratio (Brigham & Houston, 2021). 

Calculation of Case Assignment

Forecasting assumptions for 2024:

1- Revenue will grow by 10% and the tax rate will be 21%. 
 2- The CAPEX will be 6.5% of Revenue and Depreciation expense will be 6.2% of Property, equipment, and leasehold improvements gross at the start of the year which was $10, 985 million.
 3- The company issues $105 million of stock-based compensation, and it is fully vested. Additional paid-in capital will increase by the same amount. The company includes this form of compensation in operating expenses.
 4- The company has a dividend payout ratio of 25.6% of net income.
 5- No change in the following income statement accounts: Amortization of intangibles, Interest income, Interest expense, and Other, net.
 6- No change in the following balance sheet statement accounts: Goodwill, Long-term debts less current portion, Ordinary shares, Other comprehensive loss.
7- There is no change in macroeconomic readings, including the inflation rate.
8- The Restructuring and other, net is zero.
9- Consider the following accounts increase based on the percentage of the revenue in 2024.

References

Bustani, B., Khaddafi, M., & Ilham, R. N. (2022). Regional Financial Management System of Regency/City Regional Original Income In Aceh Province Period Year 2016-2020. International Journal of Educational Review, Law And Social Sciences (IJERLAS), 2(3), 459-468.

Shim, J. K. (2022). Financial management. Professor of Finance and Accounting Queens College City University of New York.

Shapiro, A. C., & Hanouna, P. (2019). Multinational financial management. John Wiley & Sons.

Brigham, E. F., & Houston, J. F. (2021). Fundamentals of financial management: Concise. Cengage Learning.

Haydarov, U. (2020). Financial management system, tools, sources of investment activities and factors. Архив научных исследований, 35.

Mosteanu, N. R., & Faccia, A. (2020). Digital systems and new challenges of financial management–FinTech, XBRL, blockchain and cryptocurrencies. Quality–Access to Success, 21(174), 159-166.

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