Potential Acquisition of Garmin Ltd. And Subsidiaries
Garmin Ltd is under consideration for acquisition by Mega Industries. As a result, an assessment of Microline’s financial condition and assessment is necessary to evaluate the company as a suitable candidate. Our team has prepared a memo stating Microline’s earning power potential , solvency position, and to which extent the companies financial statements reflect the true financial position and performance. We have also included an analysis regarding each of the six questions that you requested. Microline’s profits increased significantly from 2010 to 2011 with the net income of 2011 being over 3 times the amount of 2010. The return on equity also increased, with a 4% ROE in 2010 to 14% in 2011. Their profits are also growing faster than there assets with an increase on their return on assets of 4% between 2010 and 2011. The profit margin rose from 2% in 2010 to 5% in 2011. Sales rose from $7500 between 2010 and 2011, however, this does not account for the substantial increase in their net income. While their sales have increased, their profits have increased at a faster rate. The significant increase in their net income is largely accounted for by gains on sales of land, foreign exchange, income from affiliates and short term equity investments. Combined these account for an increase of $4000 on the income statement between 2010 and 2011. Another point of interest is the large increase in administrative expenses which increased by $5000 dollars from 2010 to 2011. The company did show an increase in sales, however, the amount of the increase brings into question what Microline is writing off as administrative expenses as there is no mention of it in the footnotes. This could be a cause for concern where the majority of the companies net income is being generated from investment opportunities rather than from the sales of...
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