Assess the current financial health and recent financial performance of the company.
What strengths and/ or weakness would you highlight to Adeline Koh?
Profitability: ROE in 2001 is 15.2 %, which means that the manager employs funds invested by the organisation’s shareholders to generate 15.2% of return. This figure compares with previous year, which had arisen about 3.5%.
ROA in 2001 is 3.09%, which means that this company is able to generate $3.09 SGD for each dollar of assets invested. This figure is not as good as that of 1998 and 1999, which 5.2% in both are.
Leverage: the debt/total capital in 2001 is 69%, which is considered to be very high comparing with previous years, which means that this company has increased its financial risk.
Asset Utilization: The sales growth rate rise to 57.4% due to Star River make more financing of 18000 SGD in 2001 and significantly purchased more property, plant and equipment to produce more product.
Days in receivables are 122.1 which is much higher than previous last few years. Therefore, star River has potential cash collection problem.
Payables to COGS in 2001 are 25%, which means that the average owing to supplier is 25% of the COGS, which relatively comparing with another previous last years.
Star River’s current ratio from 1998 to 2001 is less than one, which means that total current asset is less than total liabilities. Therefore, Star River has short- term liquidity problem to meet is current liabilities. For the quick ratio, it is even lower which deducted from the inventories which are considered as not easy to liquid, therefore, it can be significantly that Star River has big short- term liquidity problem.
Interest coverage is low which is around 2.00 from 1998 to 2001, which means that Star River does not have strong ability to meet its long- term debt.
Star River’s current...