A multinational company, Worldwide Products Inc. (WPI), is looking to award a franchise to a British...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A multinational company, Worldwide Products Inc. (WPI), is looking to award a franchise to a British company to be the sole distributor of all its products in the UK. After much investigation and research, the Board of Directors of WPI has identified four companies that meet its requirements. All these companies are keen to win the franchise. Coojelli Ltd is a very large distribution company that has been in business for many years. Park Ltd is a small niche player in the distribution market. Freuchan Ltd has also been trading for a long time but is only a fraction of the size of Coojelli. Hacraig Ltd, on the other hand, is a relative newcomer to the distribution market but is experiencing significant recent growth. All four companies have been judged as more or less of equal capability from a logistics viewpoint, there being no obvious winner. Each has the operational capacity to handle the WPI franchise. So the Board has determined that the final choice will be down to relative financial strength and performance of the four companies. The Board now wishes to examine the key financial figures on each of the companies and award the franchise to the company with the 'strongest' financials. The CFO has obtained the financial statements of each of the companies and from these has extracted the following table of figures. Income Statement Revenue Cost of sales Operating profit/(loss) Statement of financial position Non-current assets Inventory Trade receivables Bank and cash Trade payables Required: 1. 2. Park Ltd Freuchan Ltd Coojelli Ltd 2020 2019 L'000 '000 '000 '000 '000 '000 000 000 2020 2019 2020 2019 26,500 15,900 454 18,200 12,100 340 250 280 2 3,000 2,500 2,106 1,329 1,573 921 1,681 634 2,760 2,113 194 84 72 1 85 450 300 1 (18) (2) 43 123 168 80 125 83 49 1 860 820 2,000 1,500 622 600 1,700 1,305 35 79 1 Hacraig Ltd 2020 2019 166 132 251 162 140 80 102 2 78 155 155 Analyse the figures by calculating whatever ratios you think appropriate. (Show clearly all workings.) (8 marks) On the basis of your analysis in Requirement 1, explain in detail which of the four companies is most likely to be awarded the distribution franchise and your reasons for your choice. (12 marks) 248 136 75 104 148 On a different matter entirely, WPI's Directors have been discussing the company's dividend policy. The CEO is in favour of financing all investment using retained earnings and other internally generated funds and limiting dividends. She argues that a high level of retentions will save issue costs, and that declaring dividends always results in a fall in share price when the shares are traded after the dividend is paid. 3. Discuss critically the CEO's arguments about the effect of her proposed dividend policy on share price that you consider to be relevant. (10 marks - ) A multinational company, Worldwide Products Inc. (WPI), is looking to award a franchise to a British company to be the sole distributor of all its products in the UK. After much investigation and research, the Board of Directors of WPI has identified four companies that meet its requirements. All these companies are keen to win the franchise. Coojelli Ltd is a very large distribution company that has been in business for many years. Park Ltd is a small niche player in the distribution market. Freuchan Ltd has also been trading for a long time but is only a fraction of the size of Coojelli. Hacraig Ltd, on the other hand, is a relative newcomer to the distribution market but is experiencing significant recent growth. All four companies have been judged as more or less of equal capability from a logistics viewpoint, there being no obvious winner. Each has the operational capacity to handle the WPI franchise. So the Board has determined that the final choice will be down to relative financial strength and performance of the four companies. The Board now wishes to examine the key financial figures on each of the companies and award the franchise to the company with the 'strongest' financials. The CFO has obtained the financial statements of each of the companies and from these has extracted the following table of figures. Income Statement Revenue Cost of sales Operating profit/(loss) Statement of financial position Non-current assets Inventory Trade receivables Bank and cash Trade payables Required: 1. 2. Park Ltd Freuchan Ltd Coojelli Ltd 2020 2019 L'000 '000 '000 '000 '000 '000 000 000 2020 2019 2020 2019 26,500 15,900 454 18,200 12,100 340 250 280 2 3,000 2,500 2,106 1,329 1,573 921 1,681 634 2,760 2,113 194 84 72 1 85 450 300 1 (18) (2) 43 123 168 80 125 83 49 1 860 820 2,000 1,500 622 600 1,700 1,305 35 79 1 Hacraig Ltd 2020 2019 166 132 251 162 140 80 102 2 78 155 155 Analyse the figures by calculating whatever ratios you think appropriate. (Show clearly all workings.) (8 marks) On the basis of your analysis in Requirement 1, explain in detail which of the four companies is most likely to be awarded the distribution franchise and your reasons for your choice. (12 marks) 248 136 75 104 148 On a different matter entirely, WPI's Directors have been discussing the company's dividend policy. The CEO is in favour of financing all investment using retained earnings and other internally generated funds and limiting dividends. She argues that a high level of retentions will save issue costs, and that declaring dividends always results in a fall in share price when the shares are traded after the dividend is paid. 3. Discuss critically the CEO's arguments about the effect of her proposed dividend policy on share price that you consider to be relevant. (10 marks - )
Expert Answer:
Answer rating: 100% (QA)
1 Ratio Analysis a Return on Sales Operating Profit Margin Operating Profit Margin Operating Profit Revenue 100 Coogelli Ltd Operating Profit Margin 2... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
Students also viewed these finance questions
-
Question of the mini-case below: How has the sovereign debt crisis in Europe, and most importantly in Greece, affected Korres's business and financial results? What do you think Georgios Korres...
-
The City of Castleton's General Fund had the following post-closing trial balance at June 30, 2022, the end of its fiscal year: Cash Debits $265,120 Credits Sales Taxes Receivable 11,000 Taxes...
-
1. differences between debt financing and equity financing 2. accounting differences between preferred stock and common shares. 3. accounting for treasury shares; why do firms want to buy back their...
-
What is the relation between capital budgeting and the discounted free cash flow model?
-
A wall 2 cm thick is to be constructed from material that has an average thermal conductivity of 1.3 W/m C. The wall is to be insulated with material having an average thermal conductivity of 0.35...
-
For a bar element of length \(l\) with two nodes, the shape function corresponding to node 1 is given by a. \(\left(1-\frac{x}{l} ight)\) b. \(\frac{x}{l}\) c. \(\left(1+\frac{x}{l} ight)\)
-
Post-Balance-Sheet Events Keystone Corporation issued its financial statements for the year ended December 31, 2010, on March 10, 2011. The following events took place early in 2011. (a) On January...
-
Sunlight at 0.64 m reflected by the Earth is absorbed by a nadir viewing satellite sensor at an altitude of 800 km. The sensor has a circular detector with a radius of 1 mm and a bandwidth of 0.1 m...
-
Lawrence is a 16-year-old youth who was found guilty of vandalism and assault. He was convicted of breaking into his school with two friends and writing insulting slogans on the hallway walls. He was...
-
Prepare the journal entries to record the below transaction: Paid $3,000 toward lease agreement for bakery space. The agreement is for 1 year. The rent is $1,500 per month, last month's rent was...
-
State parallel axis theorem.
-
What is moment of resistance ?
-
A square bar of \(20 \mathrm{~mm}\) side and \(200 \mathrm{~mm}\) long is subjected to a compressive load of 200 \(\mathrm{KN}\) applied in the direction of its length. If all the strains in the...
-
Define bending stiffness
-
Define section modulus.
-
1. How would you mitigate the lack of mutual knowledge in a mixed-cultural project team? 2. Describe cultural differences in team-building.
-
The Taylor's series expansion for cosx about x = 0 is given by: where x is in radians. Write a user-defined function that determines cosx using Taylor's series expansion. For function name and...
-
At January 1, 2011, NCI Industries, Inc., was indebted to First Federal Bank under a $240,000, 10% unsecured note. The note was signed January 1, 2007, and was due December 31, 2012. Annual interest...
-
For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2008 for $2,560,000. Its useful life was...
-
For each asset classification, prepare a schedule showing depreciation expense for the year ended December 31, 2011, using the following depreciation methods and useful lives: Required: Land...
-
What are the resources of the organization? How are these used in management decision making?
-
Define management and indicate what its principal purposes are and why managers are essential to organizations.
-
Through the implementation of efficient and effective management, New Belgium Brewing (NBB) has grown from operating out of the founder's basement to having two state-of-the-art facilities and over...
Study smarter with the SolutionInn App