Capsim - Team Erie , need help on questions

Capsim - Team Erie , need help on questions


BUS 499 Financial/Ratio Analysis Test Name Write down or mark your answers clearly. Justify your answers by providing supporting information (for instance, calculated ratios) if the question requires it. Make sure that you have filled in all the identification information asked for above. Note: 100 points total GOOD LUCK! 1. Fill in the blanks and give reasons: Company A Company B ROE 8% 8% Profit Margin % 4% 7% TAT 3 1.7 ROA 11% 13% Generic Strategy? Equity Multiplier = Company A Equity Multiplier = Company B 8%/ (4%*3) = 0.67 8%/ (7%*1.7) = 0.67 A. Fill in the generic strategy row above. (3 points) A. Cost Leadership B. Differentiation The answer the following questions: B. How different are the two firms’ financials? Explain each ratio. How are they related to their strategies (7 points) Company A-The Company is boosting its ROE by higher asset utilization (3) in comparison with Company B. Company B- Company B is boosting its ROE with higher profit margin (7%) by offering a differentiated product with pricing power. 2. A. How would you interpret a current ratio of 0.8? (2 points) The current Ratio of 0.8 means the current assets of the company is not adequate to cover the current liabilities B. Is it good or bad for the firm? (3 points) Generally a lower current ratio is interpreted as a sign of liquid iti crunch (lower current asset to meet current liabilities) but it may vary from industry to industry C. What information you would need to extra to interpret it? (5 points) For interpreting the current ratio we need to understand the industry dynamics and the components of current assets and current liabilities B. Identify industry --------revenue (growth) averages, PM growth, and CM growth for the 3rd Competition Rounds (10 points) for all the players in this industry 3. Use this information for New Tech Company to answer the following question. You may (or may not) need to fill in missing information. NEW TECH COMPANY Income Statement 2010 2011 2012 Sales 100 110 120 Cost of goods sold 50 51 52 Depreciation 20 20 20 General, sales & admin expenses 70 65 60 Taxes 10 10 10 Net Income -50 -36 -22 Balance Sheet 2010 2011 2012 Current Assets 40 45 40 Property, plant & equipment 60 55 60 Total Assets 100 100 100 Current Liabilities 40 40 35 Long-Term Liabilities 10 10 15 Equity 50 50 50 Total Liabilities & Equity 100 100 100 INDUSTRY AVERAGE RATIOS 2010 2011 2012 CR (Current Ratio) 1.5 1.5 1 DR (Debt Ratio)=TL/TA 60% 60% 60% TAT (Total Asset Turnover) 2 2.2 2.5 PM (Profit Margin) 4% 5% 6% Sales Growth 3% 2.50% 3% Profit Growth 5% 25% 20% Which of the following items characterize New Tech Company? (It may be more than one option). EXPLAIN (and report your calculations) (15 points) 1. High debt & unprofitable 1. Low debt & unprofitable 1. Decreasing profit margin 1. High Asset Utilization Performance 1. Low Asset Utilization Performance 1. Increasing sales with a decreasing sales growth rate 1. 1, 3 and 5 characterize New Tech Company 4. Using CAPSIM Competition Round Courier Reports for the Rounds : A. Identify your closest competitor at the end of Round 3 ( Hint: identify a company with the closest products & pricing. Create a table comparing your products with specs vs their products with specs (5 points) C. Create & growth and common-size “Selected Financial Statistics” Statements for from 2nd Round to 3rd Round (15 points) D. I.Write down the steps of strategic financial analysis ( 5 points) II. Compare and contrast the performance of your firm vs. industry & the closest competitor. USE YOUR ANALYSES FROM QUESTION C ( COMMON SIZE & GROWTH STATEMENTS) (15 points) E. Which company performed the best? Which company performed the worst? for the end of the 3rdCompetiton Round ( USE COMMON SIZE & GROWTH STATEMENTS) (10 points) HINTS: QUESTION 4 B HINT: NEED TO DO THIS FOR REVENUES, PM & CM NOT FIRMS INDIVIDUALLY – FOR THE INDUSTRY AS A WHOLE! REVENUES = THIS YEAR 1. CALCULATE INDUSTRY TOTAL SALES 2. CALCULATE INDUSTRY AVG SALES DO THE SAME FOR THE PRIOR /PAST YEAR CALCULATE THE CHANGE – (THIS YEAR’S SALES AVG – LAST YEAR’S SALES AVG)/ LAST YEAR’S SALES AVG *100 = GROWTH % QUESTION 4 C HINT: 1. GROWTH = % GROWTH YOU NEED THIS YEAR’S AND LAST YEAR’S CAPSTONE COURIER REPORTS! FOR EVERYTHING! (THIS YEAR’S NUMBERS – LAST YEAR’S NUMBERS)/ LAST YEAR’S NUMBERS) *100 2. COMMON SIZE STATEMENT – YOU ONLY NEED THIS YEAR’S REPORT DIVIDE EVERYTHING ON THE FINANCIALS BY (REVENUES – sometimes Assets) HotPDF Document C131175 Front Page Stock & Bonds Financial Summary Production Analysis Traditional Segment Analysis Low End Segment Analysis High End Segment Analysis Performance Segment Analysis Size Segment Analysis Market Share Perceptual Map HR/TQM Report Ethics Report Annual Report Erie Balance Sheet Income Statement HotPDF Document C131175 Front Page Stock & Bonds Financial Summary Production Analysis Traditional Segment Analysis Low End Segment Analysis High End Segment Analysis Performance Segment Analysis Size Segment Analysis Market Share Perceptual Map HR/TQM Report Ethics Report Annual Report Erie Balance Sheet Income Statement