16th October 2009
Mr Mukesh Garg
Department of Accounting and Finance
Monash University 400 Dandenong Road
Caulfield Vic 3145
Dear Mr Mukesh Garg,
Ref: Business Valuation Group Project 2 in Semesters 2, Year 2009
Here is the report you requested on 16th October, 2009. This report attempts to analyze Ambertech Technology Limited by industry analysis, accounting analysis, financial analysis and evaluation and forecasting from ***to ***** through ***** and relative valuation multiple models.
We would like to express our sincere thanks for your valuable guidance and support during the research and completion for this assignment. Please feel free to contact us if you have any further queries regarding this …show more content…
Historical cost is normally less than the fair market value for most tangible assets, hence the exclusion of fair market value allow a lower depreciation cost which can be translated into higher reported earnings and hence showing a positive outlook for the company especially 2006 which seemed like a difficult year.
The way they amortised their Goodwill is questionable in the way they changed it from the previous treatment, in 2005 both purchased goodwill and goodwill on consolidation were done through a straight line basis over 20 years. This all changed in 2006 when the board of director changed the treatment of Goodwill, now Goodwill is allocated to cash generating units and is not subject to amortisation, but tested for annual impairment. Most probably they are trying to reduce the amortisation costs and hence boost the profitability of the …show more content…
Accounts receivables turnover is relative higher but it is fine with accounts payables when comparing to others. As we all know that one way to manage your working capital better is to decrease periods of receivables while increase your payables time. AMO has been done quite well in these areas. They have one month or less time to collect money from customers but they got nearly a year to pay off their liabilities, which would give them much flexibility of using funds.
Long term assets management
The PPE turnover of AMO is quite high compared with other three, which we can say AMO has fully utilized it long-term assets.
Since AMO is mainly distributing what they bought from others, they do not product themselves, the core long-term assets may the vans which they use to distribute. Sending goods everyday to everyplace of consumers, there definitely will incur a higher ratio of PP&E