...Assessing a Company’s Future Financial Health SciTronics Inc. Case #1 Prepared by: Kyle Peck For: Babak Lotfaliei FIN423 MW:10am-11:50am 2/11/15 Table of Contents Company Overview 3 Fundamental Analysis 3 Asset Utilization 3-4 Liquidity and Leverage 4-5 Conclusion 5 Appendices 6-15 Company Overview My group was called upon to analyze the financial statements and performance of SciTronics Incorporated, a medical industry company that supplies high quality products to various corporations. Initially, after analyzing their balance sheet ranging from the years 2005 through 2008, the company has clearly progressed and the 2008 numbers look a lot better than those of 2005 (see Appendix D). To analyze this data, we used numerous sources of financial information that included the firm’s financial ratios, various business cycles, and their source of external financing as well. Fundamental Analysis One important number that was really impressive was the dramatic increase in SciTronic’s overall sales. Using the calculations from the ratios, SciTronics’ sales jumped up at an approximately 20.77% compound rate. Furthermore...
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...Joe Tagliaboschi EMBA 222 Managerial Accounting November 3, 2013 Assessing a Company’s Future Financial Health SciTronics is a medical device company. This financial evaluation will cover the period from 2005 through December 31, 2008. The evaluation will include a review of the profitability, use of assets, and financial leverage metrics. This company appears to be financially healthy and has shown improvement in many of the metrics reviewed. The company has little long term debt, and adequate cash and owners’ equity balances. However, there are also some metrics that reveal that without some additional adjustments, the growth experienced in the past may not be sustainable. This evaluation will answer the following questions as well. * What is the assessment of the performance of SciTronics during the 2005-2008 period? * Has the financial strength and its access to external sources of finance improved or weakened? * What are the 2-3 most important questions you would ask management as a result of the analysis To evaluate the company’s performance the following evaluation criteria will be used. * Has the overall profitability increased or decreased during the period? * How well does the company deploy its assets? * How sound is the company financing? Profitability How profitable is the company? The company profit continues to grow; the Return on Sales has improved by 2.3% over the 2005 period and there was sales...
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...Assessing a Company’s Future Financial Health SciTronics Inc. Case #1 Prepared by James Elias Prepared For Babak Lotfaliei Fin 423 MW: 10:00 AM- 11:50 AM 02/11/2015 Table of Contents Company Overview and Analysis Objective 1 Assessing the Company’s Profits and Sales Growth 1-2 Assessing the Company’s Use of Assets 2-3 Determining Solvency and Liquidity 3-4 Matching Companies Exercise 5 Appendix 6-14 Company Overview and Analysis Objective SciTronics is a company that operates in the medical device industry; they sell to hospitals and other medical centers with the goal of manufacturing and supplying quality goods. Being in the medical market from 2005-2008, SciTronics has been forced to keep up with an ever-changing and highly competitive industry. For this reason I found it necessary to conduct an assessment of the company’s past and present performance. Our group’s objective was to assess the overall health and financial stability of SciTronics incorporated, to achieve this I implemented the Corporate Financial System Framework (See Appendix I) and calculated four groups of ratios: Profitability, Asset Management, Leverage and Liquidity. Assessing the Company’s Profits and Sales Growth First and foremost I looked at the company’s profitability ratios starting with sales growth from 2005-2008 (See Appendix D). Knowing how well the medical industry did during this period of time, it wasn’t a surprise...
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...= ($244,000/$115,000) = (1+r) ^4 compound rate, = 21% Profitability Ratios: it shows how profitable the Company is; Profits as a percentage of sales in 2008; Income/Sale = 14000/244000=0.0573*100=5.73% Profits as a percentage of sales in 2005; Income/(Sale )= 5000/147000 = 0.0340 *100 =3.4% This shows an increase of 2.3% from the beginning (2005). 3. SciTronics had a total of $112, 000 (75,000+20,000+7,000+10,000) of capital at year-end 2008 and earned before interest but after taxes (EBIAT) 16,000 (26,000-10,000) during 2008. Its return on capital was 14.29% (16,000/112,000) which represents an increase from the 8.11% (6,000/74,000) in 2005. 4. SciTronics had $75,000 of owner’s equity and earned $14,000 after taxes in 2008. Its return on equity was 18.66% ($75,000/$14,000) an improvement from the 8.1% ($5,000/$61,000) earned in 2005. Activity Ratios 1. Total Assets turnover for SciTronics in 2008 can be calculated by dividing $244,000 (net sales) into $159,000 (total assets). The turnover decreased from 1.58 times in 2005 to 1.53 in 2008. 2. SciTronics had $66,000 in accounts receivables at year end 2008. Its average sales per day were $668.49 ($244,000/365) during 2008 and its average collection period was 98.73 ($66,000/668.49). This represents an improvement from the average collection period of104.29...
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...9 -9 1 1 -4 1 2 REV: MAY 28, 2012 Assessing a Company’s Future Financial Health Assessing the long-term financial health of a company is an important task for management as it formulates goals and strategies and for outsiders as they consider the extension of credit, long-term supplier agreements, or an investment in a company’s equity. History abounds with examples of companies that embarked on overly ambitious programs and subsequently discovered that their portfolios of programs could not be financed on acceptable terms. The outcome was frequently the abandonment of programs mid-stream at considerable financial, organizational, and human cost. It is the responsibility of management to anticipate a future imbalance in the corporate financial system before its severity is reflected in the financials, and to consider corrective action before both time and money are exhausted. The avoidance of bankruptcy is an insufficient standard. Management must ensure the continuity of the flow of funds to all of its strategically important programs, even in periods of adversity. Figure A provides a conceptualization of the corporate financial system, with a suggested step-bystep process to assess whether it will remain in balance over the ensuing 3 to 5 years. The remainder of this note discusses each of the steps in the process and then provides an exercise on the various financial measures that are useful as part of the analysis. The final section of the note demonstrates ...
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...The vote, taken by five School of Business Promotion Committee members and the candidate’s representative revealed 3 votes in favor and 3 votes Evaluating Financial Health Dr. C. Bulent Aybar Professor of International Finance Recall the Three Pillars of Value Creation • Managers create value by focusing on product market and financial market strategies. • Product market strategies involve management of revenues and expenses, efficient allocation and use of firm assets as well as sound (positive NPV) investment decisions. • Financial market strategies involve prudent management of liabilities and optimal mix of debt and equity in funding firm operations and investments. • Finally financial market strategies require optimal distribution decisions that would balance firm’s reinvestment needs and shareholder wealth. © Dr. C. Bulent Aybar Creating Value Through Growth and Profitability Growth and Profitability Product Market Strategies Financial Market Strategies Operations Investments Financing Decisions Distribution Decisions Managing Revenues and Expenses Managing Working Capital and Fixed Assets Managing Liabilities and Equity Dividends and Repos Return on Equity • The starting point for a systematic analysis of a firm's performance is its return on equity (ROE), defined as: • ROE=Net income/ Equity • ROE is a comprehensive indicator of a firm's performance because it provides an indication...
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...9-911-412 R E V: MAY 2 8 , 2 0 1 2 ________________________________________________________________________________________________________________ Professor Thomas Piper prepared the original version of this note, “Assessing a Firm’s Future Financial Health,” HBS No. 201-077, which is being replaced by this version prepared by the same author. This note was prepared as the basis for class discussion. Copyright © 2010, 2011, 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1- 800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. Assessing a Company’s Future Financial Health Assessing the long-term financial health of a company is an important task for management as it formulates goals and strategies and for outsiders as they consider the extension of credit, long-term supplier agreements, or an investment in a company’s equity. History abounds with examples of companies that embarked on overly ambitious programs and subsequently discovered that their portfolios of programs could not be financed on acceptable terms. The outcome was frequently the abandonment of programs mid-stream at considerable financial, organizational, and human cost. It is the responsibility of management to anticipate a future...
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...bottom of page 556, leverage, λ, is erroneously called the “debt-equity ratio” whereas it should be called the “debt fraction” or the “debt-to-capital” ratio. 2. Answer Questions 5-12, 5-14, 5-16, 5-17, 5-46, 5-47 and 5-54 found at the end of Chapter 5. Write up your answers, showing all work, neatly and concisely on 8.5 x 11 inch paper. Be sure your name appears at the top of each page and staple multiple pages together. Submit your answers at the beginning of class. Late submittals will not be accepted. All work is to be your own, consistent with the University Honor Council’s Guide to Academic Integrity. 3. Read “Assessing a Company’s Future Financial Health” (HBS 9-911-412) handed out in class and then complete the financial analysis of SciTronics by filling in the blanks on pages 6 through 10. Then complete The Case of the Unidentified Industries on pages 10 and 11. Explain your choices in The Case of the Unidentified Industries in a one-page typed essay and submit it, with the booklet, in class. Be sure to write your name on the cover of the booklet and on the top of the essay. Be prepared to discuss your analysis in class. Everyone is expected to submit his or her own work, consistent with the University Honor Council’s Guide to Academic Integrity....
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...Generation, “72-Page Preview,” Alexander Osterwalder & Yves Pigneur, 2010. Available @ http://www.businessmodelgeneration.com/downloads/businessmodelgeneration_preview.pdf | Operating and Investing Decisions: Business Model Canvas Building Blocks | May 8th Lecture AL 116 [6:00 – 6:50PM]Topic: Why AFM 211? Why Week 3 exam? | May 12 – 16 | * Read: Strategy and Your Stronger Hand,” Geoffrey A. Moore, Harvard Business Review, December 2005. Available for free through UW library’s Business Source Complete electronic database. See LEARN for instructions. * Read: “Assessing a Company’s Future Financial Health,” Thomas Piper, Harvard Business School, May 2012. Available in AFM 211 Courseware Package; AND, * Complete ratio analysis for SciTronics in “Assessing a Company’s Future Financial Health” on pages 6-10 and use that analysis to answer questions 1 and 3 framed as “broad questions” at the top of page 6. * Try the “Case of the Unidentified Industries” in “Assessing a Company’s Future Financial Health” on page 11 and Exhibit 3. | Operating and Investing Decisions: Value Chain, Profit Model, and Profit Driver Analysis | May 15th Lecture AL 116 [6:00 – 6:50PM]Topic: Relevant – It Depends. On what? | May 19 – 23 | * Complete Online Module # 1 – Learning with Cases | No face-to-face class [Note: allocate your class and prep time to complete Online Module # 1] | May 22nd AFM 211 Exam # 1 [7:00 – 9:00PM]Location TBAExam # 1: Exercises. Document Business Model Canvas; Ratio...
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