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: 1.) profitability measures, 2) activity measures, and 3) leverage and liquidity measures. Using the financial data sources, I would be able to make recommendations regarding SciTronics 126 million loan request.
RECOMMENDATIONS
Upon the
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Aside from growth in sales, SciTronics improved its accounts receivable period from 104.29 days to 98.73, resulting in ability to convert into cash assets sooner. Key indicators in SciTronics Financial Leverage Ratio showed an improvement in its times interest earned from 10 times to 13 times, an indication how many times they can pay interest from profit. Overall, SciTronics have been strong in increasing its total asset and minimizing total liabilities.
3. Questions that would be ask for management:
Will the company continue to expand their fixed assets such as property and equipment
What is the plan to maintain total current liabilities that had been increasing during the period of 2005-2008
What is the plan to maximize asset and increase asset turnover, which decreased from 2005 to 2008
ANALYSIS ($ in thousands)
Sales Growth (Refer to Exhibit 5)
1. During the four year period ended December 31, 2008, SciTronic’s sales growth grew at a 21%. There were no acquisitions or divestitures.
Profitability Ratio: How Profitable is the Company? (Refer to Exhibit 3 and Exhibit 5)
1. SciTronic’s profit as a percentage of sales in 2008 was 5.74%.
2. This represented an increased from 3.54% in 2005.
3. SciTronics had a total of $159,000 of capital at year-end 2008 and earned, before interest but after taxes (EBIAT), $16,000 in 2008. Its return on capital was 13.54% in 2008, which
3. SciTronics had a total of $112, 000 (75,000+20,000+7,000+10,000) of capital at year-end 2008 and earned before interest but after taxes (EBIAT) 16,000 (26,000-10,000)
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4. SciTronic’s earnings before interest and taxes (operating income) were $26,000 in 2008 and its interest charge were $2,000. Its times interest earned were 13 times. This represents an improvement from the 2005 level of 10 times.
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The directors have pleasure in submitting their report together with the audited financial statements of the Company for the year ended 31 December 2010.
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