COMPANY BACKGROUND
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ABOUT PRODUCT
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CURRENT STATUS
60 % market share , which has fallen from 70 % in recent years. Universal Connectors, a US based firm owns 30% of market share. Remaining market share occupied by 5 Chinese producers. Sales on term of Net 60. Low buying power. Frequent delay of payment due to cash flow problem.
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Contd..
Metal prices varied considerably. Increase in demand from emerging market countries. Adopted Just-In-Time inventory practices to reduce inventory levels. Excellent relationship with unionized workforce. Investing heavily in factory automation to improve the competitiveness. Automatic packing and feeder machines to reduce labor cost. New automated warehouse.
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FINANCING
$2,000,000, five year, revolving agreement with the Bank of Nova Scotia. The loan has to be secured 100% by accounts receivable and inventory. Receivables were lend to 90%. 60% for inventories. 40% for raw material inventory.
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LOAN REQUIREMENT
Current ratio of 1.5 or more. Cash flow coverage ratio of 1.0 or higher. Long-term debt to Total capitalization ratio of 40% or less. Financial statements has to be submitted quarterly. $1,000,000 paid as salary to daughters. $500,000 paid to Katherine as a regular Income.
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CURRENT RATIO
It is an indication of companys ability to meet shortterm debt obligation. CURRENT RATIO = CURRENT ASSETS/CURRENT LIBILITIES Year 2006 2007 2008
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Benchmark Ratio 4
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CASH RATIO
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Gross Proft Year Margin 2006 35.52% 2007 31.48% 2008 27.58%
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Benchmark Ratio
32%
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To measure Companys pricing strategy and Operating efficiency. OPM=(OPERATING PROFIT/NET SALES)*100
Year Operating Profit Margin Benchmark Ratio 16%
2006 2007
2008
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14.23% 9.42%
2.52%
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Used to measure profitability. A higher profit margin indicates a more profitable. NPM=(NET PROFIT/NET SALES)*100
Net Profit Margin 8.99% 5.47% 0.04% Benchmark Ratio 10%
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RETURN ON ASSETS
It shows how profitable a company's assets are in generating revenue. ROA=(NET INCOME/AVG TOTAL ASSETS )*100
Retun on Assets 25.39% 8.01% 0.06% Benchmark Ratio 17%
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RETURN ON EQUITY
It shows how well a company uses investment funds to generate earnings growth. ROE=(NET INCOME/AVG TOTAL EQUITY)*100
Return on Equity 43.53% 13.79% 0.10% Benchmark Ratio 21%
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