Accounting Case Study Wearne

Case Study 3: WG Wearne 12009

Introduction

The accounting industry. compared financials are for a company at full called WG Wearne - a cement and aggregates Months supplier to the building 08 (LTM) period and (up /

~

We have looked to Interim

year 07, 08 and calculated appropriate. Revenues

a Last Twelve

to August

as well, where

have increased

significantly

in the 07-08

52%). This is slightly acquisition materialised growth of

down from the 06-07 period and, according sand quarries and acquisition

to the statements mobile

made, has been driven crushing equipment. (much faster positive clues that of potential

by the also

additional

of additional

This

in significantly at a time been

growing when the

profits. market

The company in which the

has been growing has been statement

successfully experiencing

than GDP and

rates)

it operates interim somewhat.

growth the

conditions environment particular Du Pont

have

relatively

benign.

However,

pyK' some

a number

market issues, in

has changed

and that they are struggling

This c~t~ on below.

with respect to debt, interest Model

cover which we comment

Du Pont Model

ROE Efficiency Profitability Leverage

2007

18.7% 1.00 0.07 2.53

2008

22.3% 1.03 0.07 2.91 point for a summary return on equity Efficiencies leverage rate It is clear here that to this leveraging the

,debtor

are potentially

low for a

business of this size, although facie a concern

with the extended

days) this is not prima

the key issue is that they will need to fund debt repayments.

Massive decline in P\E ratio caused by the 40% fall in share price expresses the markets concern for this company Because earnings yield is the inverse of the P\E ratio, the marginal reflected as a marginal increase in earnings yield. decrease in P\E is

* Share prices were attained WG Wearne month further products unlikely times...