Business Analysis and Valuation P 235

Assignment 6: P235

Question 1

Supermarket: high asset turnover, food can get old, (fruit, vegetables,…) (perishable goods)

Pharmaceutical company: high asset turnover, drugs can also get old

Jewelry retailer: low asset turnover, can’t get old, expensive products, last long, strongly differentiated product

Steel company: low asset turnover, a lot of investments needed

Question 2

Supermarket: Low sales margins, no durable goods, essential goods to survive, a lot of concurrence

Pharmaceutical company: high sales margin, a lot of investments needed, not so easy to enter the market

Jewelry retailer: high sales margin, expensive goods, exclusive goods, luxury goods

Software company: high sales margin, a lot of investments needed, not so easy to enter the market

Question 7

Days’ receivable for current quarter: This ratio will significant increase (365 divided by a smaller denominator (example: 100/32 = 3.125 => 110/42 = 2.619) gives a bigger ratio

Days’ receivable for next quarter: This ratio will significant decrease (365 divided by a bigger denominator (example: 110/42 = 2.619 =>100/32 = 3.125) gives a smaller ratio

Sales growth for current quarter: This will increase

Sales growth for next quarter: this will decrease

Return on sales for current quarter: this will remain the same, your profit before taxes increases for the same amount then the sales

Return on sales for next quarter: this will remain the same.

Question 10 P 236

Gross margin: lower for LIFO because higher COGS

Current ratio decreases because the current assets will be lower than FIFO

Asset turnover will increase assets will be lower

Debt-to-equity ratio: will increase because a higher COGS will lead to a lower net income so there will be a lower increase in equity compared to a FIFO system

Average tax rate will remain the same

Problem 3 Ratios of Volkswagen and Porsche P239

1) The Net operating profit margin (NOPAT/sales)...