[Financial Analysis (Transport Industry)]
[Institution Affiliation]
[Insert Name]
Contents
PART ONE: Financial Analysis 1
1.1Executive Summary 1
1.2 Introduction of the Report Objective 2
1.3The Ratio Analysis 2
1.4 Investment Thesis 5
1.5 Valuation 9
1.5.1 Discounted Cash Flow Analysis 9
1.5.2 Relative Value 9
1.5.3 Book Value Analysis 9
1.6 Key Risks 9
1.7 Conclusion 10
10
2.1 ComfortDelgro Company Ltd. Appropriate Sources of Finances 11
2.2 Advantages of Using Equity Financing 12
2.3 Shortcomings of Using Equity Financing 13
14
2.5 Conclusion 16
3.0 PART THREE: Analytical Discussion of Budgeting Process 16
3.1 Advantages of Budgeting Process 19
3.2 Shortcomings of Budgeting Process 19
3.5 Conclusion 22
4.0 References 22
PART ONE: Financial Analysis
1.1Executive Summary
ComfortDelgro Company Ltd. is a Singaporean multinational firm. The company is one of the greatest land transport companies globally (Soon, 2016). The firm has a global workforce as well as a global shareholding base together with a global outlook.ComfortDelgro Company Ltd. was established in 2003 after the merger of two transport corporations- the Comfort and the Delgro firms (Hofmann, 2013). The two companies were formed in the early 1970s to offer land transport services. The two companies had recorded tremendous achievements regarding growth and profitability, and they had achieved an iconic status in the industry to the extent of being listed as the most success land transport corporations (Soon, 2016). After the merger, ComfortDelgro Company Ltd. has grown and expanded significantly. Currently, the company operates in seven nations and has a glob fleet of transport vehicles of approximately 46000 (Hofmann, 2013).The company mainly operates buses, taxi, rail, car renting and leasing, automobile engineering services and inspection services (Hamilton, 2012). Additionally, the company also offers insurance brokerage services as well as outdoor advertising and driving center among others (Hofmann, 2013).
1.2 Introduction of the Report Objective
The report analyzes the ComfortDelgro Company Ltd. financial health via the use of ratio analysis. The ratio analysis will help us in the determination of the viability of the company’s investment projects and if the management is competent towards optimization of the wealth of the shareholders (Frank, 2016). The financial analysis will involve two fiscal years to help in making a comparative analysis to investigate if the company is making any improvements or not (Jones, 2015). The report after the business analysis will be of significant use to the management, government, investors, public, and the auditors among other users of accounting users to help them in making informed decisions. The report will give recommendations on the areas of excellent to the company (Vogel, 2014). Besides, it will highlight the loopholes that exist within the business for the company to make a significant collection.
1.3The Ratio Analysis
Ratio | Formula | Years Calculations | |
2014 | 2015 | ||
Return on Capital Employed (ROCE) | Net profit before interest and tax ÷ (Share capital + Reserves + Long-term loans) x 100 | 442.1* 100/ (646.4-77.4+ 493.7)= 41.60% | 450.7*100/ (665.5-64.2+ 432.2)= 43.61% |
Operating Profit Margin | (revenues – cost of goods sold – operating expenses) ÷ revenues | (4051.3- 3609.2)/ 4051.3= 10.91% | (4111.5- 3660.8)/ 4111.5= 10.96% |
Gross Profit Margin | (revenues – cost of goods sold) ÷ revenues | (4051.3- 3609.2)/ 4051.3= 10.91% | (4111.5- 3660.8)/ 4111.5= 10.96% |
Gearing | Long-term (non-current) liabilities ÷ [Share capital + Reserves + Long-term (non-current) liabilities] | 1133.6/ (646.4-77.4+1133.6)= 0.6658 | 1066.8 /(665.5-64.2+1066.8)= 0.6395 |
Interest Coverage | earnings before interest and taxes ÷ interest expense | 442.1/22.0= 20.10 | 450.7/18.4= 24.49 |
Current Ratio | (current assets ÷ current liabilities) | 1239.3/ 1258.3= 0.9849 | 1279.7/1136.9= 1.126 |