CASE STUDY

Case Study

Abstract

This paper presents a business expansion analysis of a company which has grown significantly in the last few years and wants to diversify its portfolio through the creation or acquisition firms. This expansion has required greater coordination, development of common strategies, and identification of synergies across the company. This paper looks at the issues the company has faced and will be facing particularly from a performance management perspective.

Case Study

Task A

According to given case, the directors of Primax Ltd are considering the best option for diversify their business, before going into some of the financial information, it is important to understand what this company does. Primax Ltd is a profitable furniture manufacturer which is expanding business through. In our first round company has got a benefit on sales, because all the wooden goods are sold and no more stock in the current year and company achievement also wins on sales. Market shares are also good but quit lower than competitors, unfortunately loss of gross profit and post tax profit, because of low selling price and low mark-up and over draft from bank.

Company needs to show its financial position in second round for full fill the overheads than profit of the company. In our second round, we need to introduce wooden art for full fill the overheads than profit of the company with investment of 300 million pounds, we are buy new automation for 3rd model production and we decided to remove some options from model-1 and model-2 car, because of control the cost of sales and improve the gross profit and it needs some bank loan again borrow from bank for cash flow over the business and it decided to increase the selling price for furniture goods. As the result in second round we got a great loss again on market share, gross profit, and post tax profit and also unfortunately we had stocks in end of the second year as well and lot of liquid investment to diversification of new business, over investment in promotions and we need to concentrate on production department, because it had lot of stocks and also over cash flow in the business (Pogue, 2004).

Performance Snapshot

PROFITABILITY RATIOS: Primax Alpha Beta

Gross Profit Margin on Sales

14. 2%

6.1%

8.3%

Net Profit Margin (Pre-tax)

8.23%

3.33%

4.0%

Net Profit Margin (After-tax)

4.12%

1.1%

1.9%

Operating Expense to Sales

6.6%

2.2%

1.2%

Operating Profit to Sales

3.3%

0.6%

0.92%

Basic Earning Power

6%

3%

3.3%

Return on Assets (After-tax)

4.0%

3.8%

3.9%

Return on Equity

9.26%

4.9%

6.01%

 

 

 

 

ASSET MANAGEMENT RATIOS:

Primax

Alpha

Beta

Collection Period (Period Average)

66

23

31

Collection Period (Period End)

45

33

29

Inventory Turns (Period Average)

69

42

63

Working Capital Turnover

3.2

1.2

1.6

Fixed Asset Turnover

6.2

3.3

3.9

Total Asset Turnover

5.1

2.9

3.1

 

 

 

 

 

 

 

 

LIQUIDITY RATIOS:

Primax

Alpha

Beta

Current Ratio

1.1

0.6

0.9

Quick Ratio

2.1

0.8

0.7

Sales/Receivables

6.6

4.2

4.6

Gearing Ratio

4.9

2.3

3.1

 

 

 

 

 

 

 

 

DEBT MANAGEMENT RATIOS:

Primax

Alpha

Beta

Times Interest Earned

3.7%

1.2%

1.4%

Equity Multiplier

3.36

1.02

1.6

Fixed Assets (net)/Net Worth

4.55

3.31

3.96

Debt Ratio

1.5%

0.6%

0.9%

Debt to Equity

3.3%

2.1%

1.1%

Long-term-debt to Equity

4.1

1.2

1.47

Current-debt to Total Debt

7.2

4.3

4.9

The Primax Ltd is actually treasured at £23.9 million in 2010 at manufacturers trading charges, mirroring a market which is now going into a tentative development stage next tough dealing situation throughout the last 2 years. Sources show that the market peaked in periods of worth throughout the first quarter of 2008 with the financial worsening being more deeply sensed by the commerce throughout the second half of the ...