Finnn Tractor And Equipment Company Limited Case Summary
Ashton Moss- 201104366
Prof Dr. Tim Haynes, BSAD 342:11
Case assignment #2
Date: November 25, 2014
Finning Tractor and Equipment Company Limited
Introduction: The purpose of this memo is to summarize my analysis on the case regarding “Finning Tractor and Equipment Company Limited” which is the largest distributor of caterpillar products in North America. In this memo I will provide financial analysis on the company. In addition, I will focus on the dividend policy implemented by the board of directors and how it correlates to the performance of the company.
Background information: Finning sold, leased, rented and serviced a variety of caterpillar equipment. They provided full services, parts and service facilities and one or more field …show more content…
Which suggests Finning may need to restructure their debt. In my opinion Finning’s dividend policy is irrelevant due to the fact that the board has reclassified and changed equity in order to please shareholders and is on the verge of changing it again. It is very imperative Finning’s dividend policy be amended. There has been speculation of the impending bankruptcy of the firm and justly so. Finning is in dire straits financially, and one of the areas this is evident is their liquidity ratio; which determines the company’s ability to pay off their debts. I used the current ratio method for the year 1981, which is current assets divided by current liability; this produced a result of one point four seven, which in my opinion is a bit lower than an acceptable ratio for a company of that size. The revaluation of the convertible debt to BB and B from BBB and BB also supports my opinion. I recommend to the board of Finning Tractor to change their future dividend policy but reducing the amount of dividends paid to shareholders, instead of having to reduce inventory and capital expenditure to pay for debts and interest costs. I would also recommend them to create an incentive for shareholders reinvest their excess dividends back into the company. This will help increase stock price which will ultimately increase shareholder value. Finally in my opinion Finning should restructure their debt to equity ratio in order to find a healthy balance that will allow the company to continually
Prof Dr. Tim Haynes, BSAD 342:11
Case assignment #2
Date: November 25, 2014
Finning Tractor and Equipment Company Limited
Introduction: The purpose of this memo is to summarize my analysis on the case regarding “Finning Tractor and Equipment Company Limited” which is the largest distributor of caterpillar products in North America. In this memo I will provide financial analysis on the company. In addition, I will focus on the dividend policy implemented by the board of directors and how it correlates to the performance of the company.
Background information: Finning sold, leased, rented and serviced a variety of caterpillar equipment. They provided full services, parts and service facilities and one or more field …show more content…
Which suggests Finning may need to restructure their debt. In my opinion Finning’s dividend policy is irrelevant due to the fact that the board has reclassified and changed equity in order to please shareholders and is on the verge of changing it again. It is very imperative Finning’s dividend policy be amended. There has been speculation of the impending bankruptcy of the firm and justly so. Finning is in dire straits financially, and one of the areas this is evident is their liquidity ratio; which determines the company’s ability to pay off their debts. I used the current ratio method for the year 1981, which is current assets divided by current liability; this produced a result of one point four seven, which in my opinion is a bit lower than an acceptable ratio for a company of that size. The revaluation of the convertible debt to BB and B from BBB and BB also supports my opinion. I recommend to the board of Finning Tractor to change their future dividend policy but reducing the amount of dividends paid to shareholders, instead of having to reduce inventory and capital expenditure to pay for debts and interest costs. I would also recommend them to create an incentive for shareholders reinvest their excess dividends back into the company. This will help increase stock price which will ultimately increase shareholder value. Finally in my opinion Finning should restructure their debt to equity ratio in order to find a healthy balance that will allow the company to continually