Umbrella is a silicon chip producer. Your preliminary analysis for the company’s year-to-date financial statements ending 31, December 2020 revealed the following: 1. A/R turnover is at 5.8 times. The average for the past 2 years was at 5.7 times. 2. A/P turnover is at 5.9 times. The average for the past 2 years was at 5.8 times. 3. Inventory turnover is at 13 times. The average for the past 2 years was at 12.1 times. 4. Quick ratio is at .75. You noted that there were no significant changes to this ratio since the previous years. You also noted that the quick assets are tied up either in cash or in account receivable. There are no investments in marketable securities. 5. Cash flow analysis for the year-to-date revealed that the company had a net cash increase since the last period by .5 million US dollars. Your further analysis that this increase was a result of the company selling one of its segments which is not related to its main line of business. Meanwhile net operating cash flow was a meager $50,000. 6. You noticed also that the company has a leverage of only 25%, mainly from issuances of debentures at effective interest rate of 5%. 75% of its assets are financed by ordinary shareholders paid-in capital. Its total assets are at $10 million. 60% are in current assets while 40% are in fixed assets. 7. Sales for the year-to-date are at $20 million. Gross profit rate averaged at 26% for the past 3 years. Sales are expected to grow at an average of 10% per annum for the next 10 years. 8. The company is taxed at 20%. 9. Profit margin is at 5% for the year-to-date. The average for the past 2 years was at 4%. Assume that: The company will need a short-term commercial loan of $0.5 million to finance acquisitions of equipment. Please Discuss the company’s strengths and weaknesses in terms of capacity, capital, condition, and collateral. Your discussion must also include specific recommendations for certain areas you think needs improvement
Umbrella is a silicon chip producer. Your preliminary analysis for the company’s year-to-date financial statements ending 31, December 2020 revealed the following: 1. A/R turnover is at 5.8 times. The average for the past 2 years was at 5.7 times. 2. A/P turnover is at 5.9 times. The average for the past 2 years was at 5.8 times. 3. Inventory turnover is at 13 times. The average for the past 2 years was at 12.1 times. 4. Quick ratio is at .75. You noted that there were no significant changes to this ratio since the previous years. You also noted that the quick assets are tied up either in cash or in account receivable. There are no investments in marketable securities. 5. Cash flow analysis for the year-to-date revealed that the company had a net cash increase since the last period by .5 million US dollars. Your further analysis that this increase was a result of the company selling one of its segments which is not related to its main line of business. Meanwhile net operating cash flow was a meager $50,000. 6. You noticed also that the company has a leverage of only 25%, mainly from issuances of debentures at effective interest rate of 5%. 75% of its assets are financed by ordinary shareholders paid-in capital. Its total assets are at $10 million. 60% are in current assets while 40% are in fixed assets. 7. Sales for the year-to-date are at $20 million. Gross profit rate averaged at 26% for the past 3 years. Sales are expected to grow at an average of 10% per annum for the next 10 years. 8. The company is taxed at 20%. 9. Profit margin is at 5% for the year-to-date. The average for the past 2 years was at 4%. Assume that: The company will need a short-term commercial loan of $0.5 million to finance acquisitions of equipment. Please Discuss the company’s strengths and weaknesses in terms of capacity, capital, condition, and collateral. Your discussion must also include specific recommendations for certain areas you think needs improvement
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Umbrella is a silicon chip producer. Your preliminary analysis for the company’s year-to-date financial statements ending 31, December 2020 revealed the following:
1. A/R turnover is at 5.8 times. The average for the past 2 years was at 5.7 times.
2. A/P turnover is at 5.9 times. The average for the past 2 years was at 5.8 times.
3. Inventory turnover is at 13 times. The average for the past 2 years was at 12.1 times.
4. Quick ratio is at .75. You noted that there were no significant changes to this ratio since the previous years. You also noted that the quick assets are tied up either in cash or in account receivable. There are no investments in marketable securities.
5. Cash flow analysis for the year-to-date revealed that the company had a net cash increase since the last period by .5 million US dollars. Your further analysis that this increase was a result of the company selling one of its segments which is not related to its main line of business. Meanwhile net operating cash flow was a meager $50,000.
6. You noticed also that the company has a leverage of only 25%, mainly from issuances of debentures at effective interest rate of 5%. 75% of its assets are financed by ordinary shareholders paid-in capital. Its total assets are at $10 million. 60% are in current assets while 40% are in fixed assets.
7. Sales for the year-to-date are at $20 million. Gross profit rate averaged at 26% for the past 3 years. Sales are expected to grow at an average of 10% per annum for the next 10 years.
8. The company is taxed at 20%.
9. Profit margin is at 5% for the year-to-date. The average for the past 2 years was at 4%.
Assume that: The company will need a short-term commercial loan of $0.5 million to finance acquisitions of equipment. Please Discuss the company’s strengths and weaknesses in terms of capacity, capital, condition, and collateral. Your discussion must also include specific recommendations for certain areas you think needs improvement
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