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Answered Same Day Dec 02, 2021

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Kushal answered on Dec 06 2021

160 Votes

Question—1

    % change
    PROFITABILITY:
    2015-2018
    Operating margin
    -16.0%
    Tax rate
    0.9%
    Return on sales
    -38.7%
    Return on equity
    -37.5%
    Return on assets
    -46.1%
    LEVERAGE:

    Debt/equity ratio
    78.2%
    Debt/total capital
    53.7%
    EBIT/interest
    -43.3%
    ASSET USE:

    Sales/assets
    -12.0%
    Sales growth rate
    -3.3%
    Assets growth rate
    86.1%
    Days sales outstanding
    8.7%
    Days payable outstanding
    -31.5%
    Days inventory outstanding
    72.6%
    LIQUIDITY:

    Cu
ent ratio
    17.8%
    Quick ratio
    -13.7%
Business Risk -
All the profitability ratios, ranging from the net profit margin, operating profit margins, return on equity have worsened over the last 4 years. This is a significant threat to the business that we have been operating and the potential reasons might be the new entrants competitors, expensive raw materials, higher interest expense, higher tax rates
Also the Asset turnover ratio has been decreasing, suggesting there is some inefficiencies creeping in.
Financing Risk-
As far as the liquidity and solvency ratios are concerned, cu
ent ratio has slightly improved, whereas the debt to equity ratio has been worsening and it has doubled over the given period.
EBIT coverage ratio also has been deteriorating and this is not a good sign.
Question-2
External Funding Required

    2020E
    2021E
    EFR
    8,951
    10,796
Apex' financial statement forecasts the projected sales and how the balance sheet will look like. We projected the balance sheet items like, inventories, account receivables, account payables and other accrued liabilities based on the activity ratios. These items for a part of the working capital and the balance item is shown in the cash account.
Apex can repay the long term debt with the operating cash flows. However, over the period of the time, Apex has engaged itself into providing the dividends to the shareholders and hence, they is some cash outflow. Apex has a lot of short bo
owing which it needs to entertain and hence, at this point of time the Apex has not been in a position to repay the debt. Apex debt to equity ratio has deteriorated significantly over the last 4 to 5 years and it can be a dangerous sign.
Question -3
Beta Calculation-



    Number of





    Market
    Shares





    Price
    Outstanding



     Name
    Beta
    per Share
    (millions)
    Beta Unlevered
    Market...

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