Corporate Finance: SciTronics COMPONENT PERCENTAGES INCOME STATEMENT (each item is expressed as a percentage of net sales revenue) During the four-year period ended December 31‚ 2008‚ SciTronics’ managed to improve its earnings (from 3% to 6%) thanks to a decrease in operating expenses (from 64% to 59%) and constant cost of goods (30%). SALES GROWTH During the four-year period ended December 31‚ 2008‚ SciTronics’ sales grew at a 20.69 % compound rate. There were no acquisition or divestitures
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Introduction SciTronics is a medical device company. In exhibit 1 and 2 financial data sources are given‚ which are consist of Income Statement‚ Balance Sheet‚ and Cash Flow. Financial ratios are useful indicators of a firm ’s performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm ’s financials to those of other firms. Financial ratios can be classified according
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case we will be looking at performance measures based upon the income statements and balance sheets of SciTronics (A medical device company). It is imperative that the measures are grouped into three types: (1) profitability measures (sales)‚ (2) activity (asset management) measures‚ and (3) leverage and liquidity measures. (Piper‚ 1-6) Page 6: 1-3 1. By assessing the performance of SciTronics during the 2005-2008 periods we see that it’s profitability ratio increased. The company is heading
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the four-year period ended December 31‚ 2008. SciTronics’ sales grew at 21% ($244‚000/$115‚000) = (1+r) ^4 compound rate. There were no acquisitions or divestitures. Profitability Ratios: How Profitable Is the Company 1. SciTronics’ profits as a percentage of sales in 2008 were 5.73% (14‚000/244‚000). 2. SciTronics’ profits as a percentage of sales in 2005 was 3.44 %( 5‚000/147‚000). This represents an increase of 2. 29% from 2005. 3. SciTronics had a total of $112‚ 000 (75‚000+20‚000+7‚000+10
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Step 1‚2: Analyze Fundamentals Step 3: Analyze Investments to Support the Business unit(s) Strategy(ies) Step 4: Assess Future Profitability and Competitive Performance • What has been the average level‚ trend‚ and volatility of profitability? • Is the level of profitability sustainable‚ given the outlook for the market and for competitive and regulatory pressures? • Is the current level of profitability at the expense of future growth and/or profitability? • Has management initiated major
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bridged by obtaining loans or issuing debt against the firm. 2. Fill in the blanks on pages 6 through 10. Sales Growth 1. During the four-year period ended December 31‚ 2008‚ SciTronics’ sales grew at a 65.99% compound rate. There were no acquisitions or divestitures. Profitability Ratios 1. SciTronics’ profit as a percentage of sales in 2008 was 5.74%. (Return on Sales = Net Income/Net Sales = $14 mil/$244 mil) 2. This represented an increase from 3.40% in 2005.
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EXECUTIVE SUMMARY In the case of Assessing a Company’s Future Financial Health‚ the case concentration is on SciTronics‚ a medical device company‚ performance measures based on the organization’s three primary financial data sources in Exhibit 1 & 2. Utilizing the 9 steps of corporate financial system‚ I will be able to analyze the financial health of the company to assess whether it will remain balance over the ensuing 3-5 years. The measures are grouped by focusing on “Financial Ratios” such as:
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four-year period ended December 31‚ 2008. SciTronics’ sales grew at 21% ($244‚000/$115‚000) = (1+r) ^4 compound rate. There were no acquisitions or divestitures. Profitability Ratios: How Profitable Is the Company 1. SciTronics’ profits as a percentage of sales in 2008 were 5.73% (14‚000/244‚000). 2. SciTronics’ profits as a percentage of sales in 2005 was 3.44 %( 5‚000/147‚000). This represents an increase of 2. 29% from 2005. 3. SciTronics had a total of $112‚ 000 (75‚000+20‚000+7
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effectiveness of a firm’s strategy and product development activities‚ and of customer acceptance of a firm’s products and services. Use the following questions to guide your analysis. 1. During the four-year period ended December 31‚ 2008‚ SciTronics’ sales grew at a _____% compound rate. There were no acquisition or divestitures. Profitability Ratio: How Profitable Is the Company? Profitability is a necessity over the long-run. It strongly influences (1) the company’s access
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competitors. The performance review process Sales growth Profitability Financial Leverage Performance review Liquidity Asset Management Assessing a Company’s Future Financial Health Questions • What is your assessment of the performance of SciTronics in 2008 versus 2005? • We can identify 4 main areas of analysis to asses a performance of a company – Sales Growth – How does the company grow over time? – Profitability – How profitable is the company? – Asset Management – How well does the company
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