BUSINESS ANALYSIS AND VALUATION
1. Joy, who has completed his first finance course, is unsure whether he should take a course in business analysis and valuation using financial statements since he believes that financial analysis adds little value, given the efficiency of capital markets. Explain to
Joy when financial analysis can add value, even if capital markets are efficient.
2. In 2005, Puma was a very profitable sportswear company. Puma did not produce most of the shoes, apparel and accessories that it sold. Instead the company entered into contracts with independent manufacturers, primarily in Asia. Puma also licensed independent companies throughout the world to design, develop, produce and distribute selected range of products under its brand name. Use the five forces framework and your knowledge of sportswear industry to explain Puma’s high profitability in 2005.
BAJAJ AUTO LTD
The Bachraj Trading Corporation incorporated in 1945 was renamed as Bajaj Auto Private
Limited in 1960. The company manufactures Bajaj brand of scooters, motorcycles and spare parts. Table I gives a summary of company’s financial items during the years from 2001 to 2005.
Table I Bajaj Auto Limited
Summary of Financial Items
2005 2004 2003 2002 2001
Net Sales 3023.12 3089.33 2961.98 2643.22 2638.47
PBDIT 473.88 973.4 895.57 840.94 802.23
Depreciation 177.29 145.31 132.7 143.62 117.87
Interest 7.39 3.17 4.67 8.47 7.41
Other Income 365.99 510.4 380.29 355.57 296.89
PBT 289.2 824.92 758.2 688.85 676.95
Tax Provision 26.64 211.19 217.68 224.7 236.38
Net Profit 262.56 613.73 540.52 464.15 440.57
Equity Dividend 80.95 119.39 95.51 95.51 79.59
Retained Profit 181.61 494.34 445.01 368.64 360.98
Current Assets 2061.62 2373.37 2197.01 1809.38 1363.55
Net Fixed Assets 1362.35 1114.25 921.81 682.91 603.95
Current Liabilities 1474.34 1740.67 1527.18 1259.83 988.27
Secured Loans 55.97 101.58 41.08 27.54 22.04
Unsecured Loans 457.74 394.09 308.61 230.67 191.83
Total Liabilities 4624.58
Joy when financial analysis can add value, even if capital markets are efficient.
2. In 2005, Puma was a very profitable sportswear company. Puma did not produce most of the shoes, apparel and accessories that it sold. Instead the company entered into contracts with independent manufacturers, primarily in Asia. Puma also licensed independent companies throughout the world to design, develop, produce and distribute selected range of products under its brand name. Use the five forces framework and your knowledge of sportswear industry to explain Puma’s high profitability in 2005.
BAJAJ AUTO LTD
The Bachraj Trading Corporation incorporated in 1945 was renamed as Bajaj Auto Private
Limited in 1960. The company manufactures Bajaj brand of scooters, motorcycles and spare parts. Table I gives a summary of company’s financial items during the years from 2001 to 2005.
Table I Bajaj Auto Limited
Summary of Financial Items
2005 2004 2003 2002 2001
Net Sales 3023.12 3089.33 2961.98 2643.22 2638.47
PBDIT 473.88 973.4 895.57 840.94 802.23
Depreciation 177.29 145.31 132.7 143.62 117.87
Interest 7.39 3.17 4.67 8.47 7.41
Other Income 365.99 510.4 380.29 355.57 296.89
PBT 289.2 824.92 758.2 688.85 676.95
Tax Provision 26.64 211.19 217.68 224.7 236.38
Net Profit 262.56 613.73 540.52 464.15 440.57
Equity Dividend 80.95 119.39 95.51 95.51 79.59
Retained Profit 181.61 494.34 445.01 368.64 360.98
Current Assets 2061.62 2373.37 2197.01 1809.38 1363.55
Net Fixed Assets 1362.35 1114.25 921.81 682.91 603.95
Current Liabilities 1474.34 1740.67 1527.18 1259.83 988.27
Secured Loans 55.97 101.58 41.08 27.54 22.04
Unsecured Loans 457.74 394.09 308.61 230.67 191.83
Total Liabilities 4624.58