'Assessing a Company’s Financial Future\r'

'Assessing a Company’s future day Financial Health Case Analysis decision maker Summary A riotous’s world power to analyze its long-term financial health batch become a key asset for vigilance as it formulates new, and/or revises old, strategies and goals. The key goal of concern is to anticipate future imbalances in its financial systems in advance a negative pass on occurs inside its financials. As the HBR case describes, â€Å"Management must ensure the doggedness of the f low-down of funds to all of its strategically cardinal programs, even in compass points of adversity. This is true in argumentation but also in everyone’s in the flesh(predicate) life. There lead unceasingly be ups and downs in life, but everyone as an individual must pee for these obstacles and continue to strive forward. Analysis 1. Does spunky offset always require external financing? No, high growth of a firm does not always require external financing. The need for a firm to rely on external financing depends on the industry of the firm. As explained in the case, a eating place does not require external financing to result in high growth.With a low direct of total assets found in a restaurant, it forget not need financing during a effect where it experiences rapid growth because the financial possibility will be offset by the increase in accrued expenses. On the other hand, in a different industry where the level of total assets is sooner rangy, this gap can’t be sufficed by an increase on the liabilities side of the balance sheet. This gap can only be bridged by obtaining loans or issuing debt against the firm. 2. Fill in the blanks on pages 6 through 10. gross revenue Growth 1. During the four-year period terminate declination 31, 2008, SciTronics’ sales grew at a 65. 9% compound rate. There were no acquisitions or divestitures. positivity Ratios 1. SciTronics’ profit as a percentage of sales in 2008 was 5. 74% . (Return on Sales = dinero Income/Net Sales = $14 statute international nautical knoteee/$244 millilitre) 2. This be an increase from 3. 40% in 2005. (Return on Sales = $5 mil/ $147 mil) 3. SciTronics had a total of $111 mil of capital at closing 2008 and take in, earlier pertain but after taxes (EBIAT), $15. 158 mil in 2008. Its output on capital was 13. 66% in 2008, which stand for an increase from the 7. 72% earned in 2005. 4. SciTronics had $75 mil of owner’s equity and earned $14 mil after taxes in 2008.Its hap on equity was 18. 67%, which delineated an good from the 8. 20% earned in 2005. (ROE2008 = 14 mil/75 mil and ROE2005 =5 mil/61 mil) Activity Ratios 1. Total asset turnover rate for SciTronics in 2008 can be calculated by dividing $159 mil into $244 mil. The turnover deteriorated from 1. 58 times in 2005 to 1. 53 times in 2008. 2. SciTronics had $66 mil invested in accounts receivable at year-end 2008. Its average sales per day were $668,493. 15 d uring 2008 and its average aggregation period was 98. 73 days. This represented an improvement from the average collection period of 104. 9 days in 2005. 3. SciTronics patently needed $29 mil of inventory at year-end 2008 to support its ope proportionalityns during 2008. Its activity during 2008 as measured by the cost of goods sold was $74 mil. It therefor had an inventory turnover of 2. 55 times. This represented an improvement from 2. 05 times in 2005. (Inv. Turnover2008 = 74 mil/29 mil and Inv. Turnover2005 = 43 mil/21 mil) 4. SciTronics had net fixed assets of $18 mil and sales of $244 mil in 2008. Its fixed asset turnover proportionality in 2008 was 13. 56 times, a deterio symmetryn from 16. 33 times in 2005. (FA Turnover2008 = 244 mil/18 mil and FATurnover2005 = 147 mil/9 mil) Leverage Ratios 1. SciTronics’ ratio of total assets divided by owner’s equity increased from 1. 52 at year-end 2005 to 2. 12 at year-end 2008. 2. At year-end 2008, SciTronics total li abilities were 52. 83% of its total assets, which compares with 34. 41% in 2005. 3. The market value of SciTronics equity was $175,000,000 at December 31, 2008. The total debt ratio at market was 32. 43%. (TD @ market = 84 mil/259 mil) 4. SciTronics’ earnings before participation and taxes (operating income) were $24 mil in 2008 and its interest charges were $2 mil. Its times interest earned was 12 times.This represented an improvement from the 2005 level of 9 times. 5. SciTronics owed its suppliers $6 mil at year-end 2008. This represented 8. 11% of cost of goods sold and was a diminish from 11. 63% at year-end 2005. The company appears to be more prompt in paying its suppliers in 2008 than it was in 2005. 6. The financial riskiness of SciTronics falling off between 2005 and 2008. liquid state Ratios 1. SciTronics held $133 mil of current assets at year-end 2008 and owed $48 mil to creditors, due to be paid within one year. SciTronics’ current ratio was 2. 77, an decrease from the ratio of 3. 90 at year-end 2005. . The quick ratio for SciTronics at year end 2008 was 2. 17, and increase/decrease from the ratio of 2. 90 at year-end 2005. (Quick2008 = (133 mil-29 mil)/48 mil and Quick2005 = (82 mil-21 mil)/21 mil) Profitability Revisited 1. The improvement in SciTronics’ snuff it on equity from 8. 2% in 2005 to 18. 7% in 2008 resulted from an increase (RoS2008 = 14 mil/244 mil and RoS2005 = 5 mil/147 mil) in its return on sales; and from an decrease (ATO2008=244 mil/159 mil and ATO2005=147 mil/93 mil) in its asset turnover, and an decrease (Lev2008=159 mil/75 mil and Lev2005=147 mil/61 mil) in its financial leverage. . Assign the five strange industries to A, B, C, D, and E on Exhibit 3. A electric automobile Utility †low inventory, large fixed assets B Discount General Merchandise Retailer †large fixed assets C Japanese automobile maker †large fixed assets, longest inventory turnover time D Automated Test Equipment â € low inventory, high accounts payable E Upscale decorate Retailer †small margin of profitability, medium-sized inventory\r\n'