Financial Analysis
Autor: Cao Phương Trà • October 24, 2016 • Case Study • 2,752 Words (12 Pages) • 1,190 Views
Question 1
Colour Group is considering an M&A plan and has identified Green and Yellow who operate in the same industrial sector as its target.
Below are the financial ratios calculated from financial statements of Green and Yellow.
Profitability ratios Green Yellow Industrial average
ROCE before tax % 22 28 20
Return on equity % 18 22 15
Net profit margin % 11 5 7
Gross profit ratio % 25 12 20
Activity ratios
Total assets turnover = times 1.5 4.0 2.5
Non-current asset turnover = times 2.3 12.0 5.1
Receivables collection period in weeks 8.0 5.1 6.5
Inventory holding period in weeks 21.0 4.0 13.0
Liquidity ratios
Current ratio 1.8 1.7 2.8
Acid test 0.5 0.9 1.3
Debt–equity ratio % 80.0 20.0 65.0
Required:
(a) Prepare an analysis report to the directors of Colour Group to assess the performance of these two companies from the information provided, indicate which one you believe to be a better acquision.
(b) Identify areas which you consider required further information is needed before a final decision can be made.
Question 2
Tea is a limited company which is seeking opportunity to grow through M&A. You are a member of an investment team considering the purchase of Sugar, a listed company that produces and trades a complementary products of Tea’s.
You are required to prepare a report evaluating the recent performance of Sugar and quality of its management. Information which derived from the financial statements of Sugar for the three years ended 31 December 2013, 2014 and 2015 is given below:
...