Billig AG is in financial difficulties and hires you as a crisis consultant. As a first step, you try to get an overview of the financial situation of the company and compile the following relevant information from the 2018 fiscal year (published in accordance with IFRS):

• The turnover of Billig AG amounted to CHF 280 million, EBITDA amounted to CHF 18 million.

• Depreciation amounted to CHF 15 million and personnel expenses totaled CHF 45 mil- lion.

• Short-time work was introduced in 2018, which had a positive effect of CHF 7 million on the result.

• Liabilities consist of interest-bearing bank loans in the amount of CHF 120 million, trade payables in the amount of CHF 20 million and a non-interest-bearing loan in the amount of CHF 10 million.

• The share capital amounted to CHF 100 million on the balance sheet date.

• The weighted average cost of debt amounted to 3.4%, the weighted average cost of equity amounted to 5.6%.

1. What is the shortfall in earnings in terms of EBIT of Billig AG measured by the ROCE target?

2. Could you please suggest and prove options can be useful to close the shortfall?

Additional question (general question)

3. How should i evaluate the financial statements if i wanna understand if company faced  any crises such as Result, Liquidity crises or their emerging stages ?

Answer rating: 100% (QA)

Solution to Q1 Firstly lets calculate the earnings required as per ROCE target It can be computed as ... View the full answer