Company Analysis : Usg Corporation

With reference to the financial ratios of HTC in Exhibit 1a, over five years (2004 to 2008), its average net profit margin was 18.8%, return on assets 34.2%, and return on equity

Solution – QUESTION 2 (written by Asher Curtis) - 10 Marks Suggestions only: 1. (3 marks for identifying the three dimensions) Applications of cost and equity differ on three dimensions. First, the treatment of dividends, is written against the investment account (Equity) or recognised as revenue (Cost). Second, the treatment of profits reported by the associated entity and the ammortisation of goodwill (the difference in the cost paid and the fair value of the net assets acquired) are not recognised when applying the cost method. The only case where net profit is not affected by choice of the method is where there is no goodwill (cost = fair value of net assets acquired) and the firm pays out all of its profit as dividends. Any of the following alternatives provide examples (2 marks for any of the following): a. The case for a profitable company that pays less than 100% profits out as dividends: The net value of the investment increases under the equity method, which will be more than cost unless the investment is revalued. b. The case for a loss company that pays no dividends: Unless the investment is subject to a recoverable amount test, application of the equity method

The financial performance of the company over the years six t thirteen is shown in table no 7. The data includes Revenue generated over the years, Earning per share, Return on Investment and Stock Prices. Chart 5 shows that there has been a decline in the revenues generated. Charts 6 to 8 all show a decline in Earnings per Share, Return on Equity and Stock Prices suggesting a poor financial performance by the company.

1. Please conduct a financial ratio analysis using the data in Exhibit 2. How do the results reflect different strategies pursued by the 4 firms?

Griggs Sporting Goods, Inc. is sporting goods and outdoor equipment store chain that was established in 2011 and headquartered in Atlanta, GA. The company operates with six departments which include competitive sports, camping, hunting and fishing, apparel, footwear, and licensing. The franchise has 600 stores and three distribution centers throughout the United States. Also, the company operates in four geographical segments, which include North America, South America, China, and Eastern Europe. I currently work at the company as the lead logistics coordinator and one of my major accolades was increasing the organization return on assets during the 2014-2015 yearlong GSG development project.

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

d as a mom and pop shop and now is one of the largest trend setting corporations in the world.

This case analysis will examine the company’s initial meteoric growth, leveling performance in recent years while

3) Based on the data in Exhibit 7 and the definition of operating income gains given

- The financial statements for the past three years show a decline trend in both the operation and return on shareholder of the company, so a closer look at the factors contributing to this decline is needed.

The results of the company’s return on assets ratio measuring profitability overall was 7.2% in 2010 and 8.1% in 2011 having an increase of 0.9%. Return of common stock ratio that portrays the

KHS GmbH is one of the leading producers of filling and packaging system in Germany. The company is based in Dortmund, Germany. The company also has production facilities in 5 countries outside Germany situated in Brazil, The United States, Mexico, India and China. KHS GmbH’s also has their branches across 83 countries around the world. The company has revenue of around 1,077 Million Euros as estimated in the year 2014 and has more than 4,500 employees in the company worldwide. The production cost in Germany is very high that the profit margin is too low. Moving the production to other foreign countries where the labour cost is lower compared to that of Germany could sort out the problem according to the management. Indonesia is an option that the company management is looking forward to start the production. The strategic location in relation to giant economies of China, India and Australia, low labour cost and access via sea route are the main advantages that Indonesia has. But, being a complex country, there are certain risks that the company should keep an eye on before investing in Indonesia.