FINANCIAL DECISION MAKING

Case Study 1 Pierrodel SPA {Pierrcdel} is a longestablished Italian company selling high quality gearboxes to the automotive industry throughout Europe. Revenue and prot growth have been strong over the past few years, and the board of directors has been investigating van'ous plans for further sustainable growth. You bought shares in the company at E? .50 per share a year ago on the recommendation of a business colleague- In conversations with other colleagues you discover that many of them were delighted with their total shareholder returns in other companies over the last year. When looked at together, your colleagues' total shareholder returns averaged out at just over 5.5%. This is the rst set of nancial statements that you have seen since buying your shares and the price of the share on 31 May 2021 was T-T5. The once today has risen to 8.00- Pierrcdel's Draft Statement of Financial Position at 31 lvlay 2021 and its Draft Income Statement for the year ended 31 May 2021 are summarised below: Statement of Financial Position as at 31 May 2021 Em m Non-current assets 44.0 Current assets: Inventory 22.0 Accounts receivable 0.0 Cash E 30.0 Total assets 30.0 Equity and liabilities Issued share capital {nominal value per share 0.10) 4.0 Share premium 4.0 Prot and loss reserve 36.0 44.0 Non-current liabilities: 10% bond [redeemable 2023) 3.0 12% 4year bank loan portion repayable 20232025 E 11.0 Current liabilities: Bank overdraft {3% interest) 3.0 12% 4year bank loan portion repayable 2022 1.0 Accounts payable 16.0 25.0 Total equity and liabilities 30.0