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Vanguard Security International Transaction Dilemma Case Solution & Answer

Financial Analysis of Vanguard Security International:

Net profit margin:

Vanguard Security International Transaction Dilemma Case Solution
Vanguard Security International Transaction Dilemma Case Solution

The net profit margin of the company was strong in the year of 2004 and 2005 with the net profit margin of 18% and 22%. On the other hand, the net margin has been deteriorating from 2006 to 2008. The net margin in 2006 was 19% and in 2008 there was net loss in the company. This is mainly due to the decrease in the revenue of the company, which has played the key role in net loss.

ROA:

The return on assets was also in a better position till 2007; however the return turned in to loss in 2008 due to the net loss of the company. This shows that the company’s assets are unable to give return to the firm.

ROE:

The return on equity was also in a better position from 2004 till 2007 when the return was from 14% to 26%. However, due to net loss of the company, the ROE became negative in 2008.

Current Ratio:

The current ratio of the company is calculated on the basis of the financial results given for the year of 2008. The current ratio determines the company’s ability to cover its current liabilities from the current assets of the company.The ratio of the company is 0.63, which is below the acceptable level and shows that the company’s liquidity is low.

Quick Ratio:

The quick ratio of the company shows the ability of the company to cover its current liabilities from its current assets less the inventory of the company; this is normally less than the current ratio of the company. The quick ratio of Vanguard Security International in 2008 was 0.

54,which is the lowest level of the ratio. This shows that the liquidity of the company further decreased by decreasing the inventory of the company.

Debt over Total liabilities:

The debt over the total liabilities is the ratio, which shows the percentage of the debt of the company against the total liabilities of the company. The debt over total liabilities of Vanguard Security International is 48%, which is acceptable.

Debt over Equity:

Debt over equity ratio of the company is the percentage of debt of the company against the equity of the company. The ratio is also named as gearing ratio. The debt to equity ratio of Vanguard Security International was63% in 2008, which is high, hence making the company highly geared.

Debt over Total Assets:

The debt over total asset is the percentage of the company’s debt against the total assets of the company. The debt over the total assets ratio of Vanguard Security International is 27%. This shows that the ratio of debt over the total assets of the company is 27%.

3. Determination of the bid in US dollars:

The price of the bid was determined in dollars by the management of Vanguard Security International at the spot rate of April 1st.The usage of the spot rate of April by the management is inappropriate because the bid was not accepted at the date of April by the U.S Company and Vanguard Security International did not know at the time of determining the bid in US dollars that the bid will be successful or not.
The bid was accepted by the US Company in May 15 around forty five days after the determining the bid in US dollars.Therefore the spot rate on May 15 should be used to determine the bid in US dollars……….

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