Comprehensive Case Analysis - International Gaming Technology (IGT)



Executive Summary

International gaming technology is a Nevada based public limited company. The company has specialization in the manufacturing, design, development, distribution and sales of network systems and gaming machine. It also deals in the development of mobile and online gaming systems (solutions). Company is headquartered in Las Vegas. Company is listed on the S&P 500 (standard and poor 500 index), and its reported revenue for last year is around $2 billion. Company was established by Wlliam S. Redd in 1975. 5000 or more employees are working under the shelter of IGT. IGT is performing very well in the Multimedia & Graphic Software industry. Aristocrat Leisure Limited, Bally Technologies, Inc. and WMS Industries Inc are the direct competitors of IGT. Performance of IGT against 42 industry leaders is appreciable and encouraging. Ratio analysis and valuation analysis state that company has been trying to improve their performance but valuation analysis state that company's share prices will decrease due to the prediction that overall industry growth expectation will be moderate. Furthermore, according to researchers, gaming machine manufacturers are usually sold at lower prices and this has impacted on their financial performance more after 2008 crisis. But, IGT analysis indicates that there are chances of future growth since population is increasing and also increased in users that are much interested in video games and this generation has been termed as game-playing generations' age. This is the reason why it is suggested to hold this stock since it is expected that prices will increase.

A)EXECUTIVE SUMMARYI

B)EVALUATION OF RATIOS1

(1)Short-term liquidity1

(2)Cash forecasting and performance analysis.1

(3)Capital structure and solvency2

(4)Return on invested capital.3

(5)Asset turnover (utilization)3

(6)Profitability and equity analysis.3

C)USEFULNESS OF THE FINANCIAL STATEMENTS OF IGT4

D)ACCOUNTING PRINCIPLES AND ANALYTICAL MEASURES4

E)FORECAST INCOME STATEMENT, BALANCE SHEET, AND STATEMENT OF CASH FLOWS AND A TERMINAL YEAR IN YEAR 66

F)VALUATION ANALYSIS7

G)CONCLUSION AND RECOMMENDATION10

REFERENCES11

Evaluation of Ratios

Short-term liquidity

Short term liquidity position of a company determines its capacity (ability) to pay off its short term debt compulsion (obligations). Companies use a number of financial ratios to identify its short term liquidity position. Higher value of these ratios indicates that the company is safe. Quick ratio, working capital ratio, net working capital ratio, current ratio, cash ratio and acid test ratio are some major parameters to calculate the short term liquidity position of a company. Table given below is showing the position of IGT's short term liquidity in last five years. It assists investors in understanding the company to meet its debt obligation (IGT, 2013). Average value of current ratio is 2.163 in last five years and is showing a good position. Quick ratio is also greater than 1 in last 5 years (Brigham, Ehrhardt, 2012).

2012

2011

2010

2009

2008

Average of 5 years

Current Ratio

2

2.64

2.06

1.98

2

2.136

Quick Ratio

1.22

1.77

1.09

1.16

1.08

1.264

Source: Nasdaq

Cash forecasting and performance analysis.

Profits and long term growth of an organization depends upon its overall performance There are a number of financial ratios that company uses in order to measure its performance. The financial parameters include earning per share, receivable turnover, inventory turnover ...