You are asked to analyse the company financial statements from different perspectives to assess how the company is positioned vs its main competitor. They provide you with some key indicators.
· 1- Analyse the profitability of the company.
o To do that calculate:
§ The gross margin percentage (4 points)
§ The return on total assets (4 points)
§ The return on equity (4 points)
o They provide you with some key indicators of the company main competitor. How is the BBB corporation compared to their main competitor in terms of profitability? (4 points)
§ Gross Profit margin= 38.6%
§ ROE= 34.4%
· 2- Assess the liquidity and asset management of the company
o To do that calculate:
§ Working capital. (4 points)
§ The current ratio. (4 points)
§ The acid-test ratio. (4 points)
§ The average collection period. (4 points)
§ The average sale period. (4 points)
§ The operating cycle (4 points)
o Use the calculations above to asses how the company is positioned in terms of liquidity and asset management. They provide you with some key indicators of the company main competitor. How is the BBB corporation compared to their main competitor? (4 points)
§ Current ratio= 1.29
§ Average collection days= 32
§ Average sales days= 57
· 3- Assess the company solvency:
o In order to do that, calculate:
§ The debt-to-equity ratio. (4 points)
§ The times interest earned ratio (4 points)
o They provide you with the key indicator below of the company main competitor. How is the BBB corporation position compared to it? (4 points)
§ Debt-to-Equity= 4
· 4- Summarize which are the strengths and weaknesses of BBB corporation vs its main competitor based on the analysis and comparison performed. Which recommendations would you give to the company management to improve its competitive position? Support your answer on your calculations. (4 points)
· 5.-Explain why a difference between Net income and operating Cash Flow is there, explain the reasons using the actual data of company BBB. (20 points)
