Debt collection companies Credit Corp Group and Collection House have reported uplifts in revenue and profits for 2015 suggesting that the debt collection market is flourishing.
Speaking about Credit Corp Group’s results, chief executive officer Thomas Beregi noted that the lending business was driving growth, with the traditional business of buying debt ledgers remaining stable. The company’s loan book has grown from $63 million to $100 million and its share price closed at $13.21 — significantly higher than the $4 it traded at in 2011.
Collection House’s results reflect its growth strategy based upon growing purchased debt ledger collections and investment in systems and analytics to improve the quality of such purchased debt ledgers. The return on this investment is evidenced by the annualised cash recovery yield being more than 40 per cent higher than in the corresponding two-year period.

Required
Locate the most recent annual reports of Collection House and Credit Corp Group, and other resources available, to answer the following:
a. The debt collection industry has two main business models: debt collection with and without recourse. Explain the difference in the business models.
b. Assume that you are an analyst. Calculate the necessary ratios for the past two years to be able to write a report on the financial performance and position of the two companies.
c. Read the management commentary and discussion in the annual reports of the companies and identify the financial information that is referred to in the management commentary.
d. Explain why it is important to read the Accounting Policy Notes of Collection House and Credit Corp Group to contextualise ratio analysis.