'Astral Records Ltd Case Report\r'

'————————————————- ————————————————- KOZMINSKI UNIVERSITY ————————————————- Financial Statement Analysis ————————————————- ————————————————- full of life Review ————————————————- ————————————————- stellar(a) Records Ltd ——————————————— ;—- Ewelina Laguna 23200 ————————————————- Joanna Czechowicz 23155 ————————————————-Yue Jingtong 23275 ————————————————- ————————————————- April 15, 2012 ————————————————- Academic course 2012/2013 ————————————————- ————————————————- I here(predicate)by certify that this paper is the resoluteness of my own work and that every(prenominal) sources I utilize have been makeuped. ————————————————- ————————————————- ————————————————†Signature ————————————————- Kozminski University 2010 1. Please assess the topical financial health and recent financial action of the order. What strengths and/or weaknesses would you highlight to Sarah Conner? The meeting managed to pick expose a few factors to check the current financial health and recent financial performance of the posticipation except they did not superlative taboo the gist sales from income statement ar increase. The thing we did not like was from th e show bear witness of view the group didn’t depict us the good legal whim of the situation like their report, and during the creation it is so strenuous to catch the headspring of the question.The group croaks us magnificent acts which we thought is from evaluating the financial situation tho from the case exhibits. They didn’t mention the situation of the company (CEO been killed) they solitary(prenominal) talking about the phone numbers, in this excite of view the group steering on numbers too more than on this question. And in our opinion it lead be bankrupt if they put slightly graph to show the trend. The trend crapper show us the financial health. The confuse part is they didn’t go to the point of the question directly. They didn’t give us the certain answer in the scratch line part of question one.The good part is from the report; we net see the group was really focus on this question compargon rest of the questions, wit hal the answer of first question is much better comparing the presentation. It will be good if they are not only showing the numbers further also available to explain the numbers. From the report we can see gatherly about the EBITDA symmetry up to right off we cannot find anything from the presentation. Here is the copy from the report: â€Å"In operating management we employ gross cabbage and EBITDA ratios (Table 2. ,). We use EBITDA ratio to better evaluate Astral financial condition- companies have several(predicate) distribution and price policies which lead to different set about structure. ” The ratios showed really construct in the report, and they think it is the most significant ratio to see the financial health however they did not show anything during the presentation. 2. Please hope the financial statements of the flying for 1994 and 1995. What will be the external financing requirements of the dissolute in those age? Can the firm riposte its loan within a reasonable full point?The purpose of this question was to detect the skills of preparing financial forecast. However, during the presentation the group did not show us how to forecast but only numbers again. Audience may lose avocation to follow. And it is also to catch the point during the presentation. Besides the group’s answer to this question, in the presentation and report, fall upon too much as they just mentioned; â€Å"Sales growth: 15%, Dividends, Fixed-assets, delight write down , Production monetary care for & expense and Admin & selling expense” In our point of view here is no need to assume too many unchanged numbers.And more given means more incorrect of the result. For example here is no need to assume stable interest expensive. During the presentation, when people asking why utilize the numbers they said just because of assumption. The growth rate they were using is 15% and they give no reason, however the 15% is from the ex pected growth rate not only from the assumption. Considering all the previous calculation is from assumptions and we must meet but if they do it more careful and using less assumption it will be much better equation the thing they have nowadays. 3.What are the see driver assumptions of the firm’s early financial performance? * What are the managerial implications of those key drivers? * That is, what aspects of the firm’s activities should Conner especially focus on? Question 3 is not sort out during the presentation however they showed everything in their report. 4. What is Astral’s weight average equal of capital (WACC)? * What methods did you use to pronounce the WACC? * What key assumptions especially influenced the WACC? Question 4 looks correct, but they didn’t show us numbers and we determine like the result is from the heaven.After checking the report we found out they use the vituperate data. What they wrote in their report: ‘â⠂¬ËœWACC was reckon using the following inputs; Using information from the comparables, Haris-Bershel and Donaldson, Inc E = Equity = average outstanding shares of the two comparables utilise multiplied by their average book economic value per share D = Debt= long-term debt E(re )= cost of truth = Gordon growth model= average comparable dividend, 10% growth, average comparable share price D(re) = cost of debt= libor + 1%” They have to tell us the number they were using whatever during the presentation or in the report.The most confusing part is cost of equity. in that location are 2 ways to calculate the cost of equity: And they were choosing the first way. They were using the different dividend and we nevertheless off cannot find out the number they use. And they feel the number incorrect so they even divided by 2 to make the number similar as what we usually use during the lecture. In our case we got all the numbers to evaluate the cost of equity and the different ways should show the similar numbers of cost of equity. So our calculation of the cost of equity= safe return (6%)+beta(1. 45)*(average stock return(0. 8)-risk free return)=8. 9% And the WACC=5. 1. This part of the present is the worst and people cannot understand the point during the presentation. The report is not enough explanations. As you can see the group’s method would be not only confusing themself but provided them with the wrong answer. 5. What are the free cash flows of the packaging railroad car investment? Should Conner approve the investment? The Group did not answer to this question at all. It was not clear where there it actually is better to buy a machine later or not. They did not compare the two situations, just put not clear assumption.Therefore here is a proposition of alternative approach that in our opinion makes it clearer. * The discount rate used for calculation is the WACC from previous question. If you look at the totals and the differences amongst t hem it becomes quite clear that buying the machine now will result cost only 718,401 in terms of all cost for 10 years projection. At the same time the present value of all sawing to be made is higher by 280,028 if the machine is to be bought now. Evidently looking at this numbers will make you conclude that it is in fact worth to but the new equipment now.However it is important to look at general condition of the company. belongings that in mind we must say that even thou the calculation would suggest to buy it now the company would have to finance it with a loan. It already has a lack of cash so reservation it even worst by investing some other million is not a best idea. particularly that they can buy it any time in the future I would first deal with their dearth of cash and excess of account receivables and inventories. Then it will be a time to think about new investment in the equipment.\r\n'