Income Statement Analysis:

Company G has a gross profit margin of 37% as compared to 74% of company H. And also, company H has Net Income margin 30%, significantly more than 5% of company G,which again relates company H with company X, as it doesn’twholly own and also takes franchise fees because of which its gross profit margin and Net Income margin have gone up.

Ratio Analysis

Market Data:

Price to earnings (P/E) ratio of company G is 60 (very high), which is significantly higher than that of company H i.e. 24 even though its dividend payout ratio is zero as compare to 30% of company H. If we relateto this above information, Company Y is using a strategy of owning all its properties that’s why its dividend payout should be zero. So again, this makes our prediction more strong i.e. Company G is actually company Y and vice versa.

Liquidity:

As company H has huge liabilities due to which values of its liquidity ratiosare very low and again company G seems stable in terms of liquidity. This doesn’t give us enough information to identify companies but tells us about the ability of their current assets to pay back their current liabilities.

Asset Assessment:

The major difference here is in terms of fixed asset turnover, which again is because Company H has a lower number of fixed assets that’s why its fixed asset turnover ratio is very high as compared to Company G that is, 14.1 and 0.6 respectively.

Debt management:

Company H, despite its huge total debt to total asset ratio of 159%, which means it is going to face more challenges in future to pay back its debt, as its liabilities are 59% more than its total assets but it has favorable Interest Coverage Ratio. In the case of company G, both ratios are smooth and stable.

DuPont Analysis:

As discussed earlier, the net profit margin for company H is very much higher than company G because it’s one revenue source is in the form of management and franchise fees,which means it has a very small proportion of the cost of goods sold. Moreover, Asset Turnover is higher for company H, which shows it is generating good revenues out of its assets.

 

Conclusion:

After an analysis of financial data and ratios, we have enough information to identify Company G and H on the basis of a given business description of two companies.

In the hospitality industry, Company X is actually Company H and Company Y is Company G.

Company X = Company H

Company Y = Company G

Newspaper Industry:

As the newspaper industry also encountered very drastic changes in its business model due to the introduction of e-newspapers and digital advertising. This industry also has its own unique features. Therefore, in order to analyze a company, we must need to know about the nature of the business.

We are provided with the financial data and ratios of two company I and J. In addition, we also have the business description of two companies…………………

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