Cochlear Case
Major Assignment Part 2
Company: Cochlear Limited (ASX: COH)
Student name: Trinh Hoang Anh Vu
Student ID: 41735765
Prospective Analysis
In this analysis, Cochlear’s income statement and balance sheet are being forecasted using mainly the percentage of sales forecasting, except the following items: Interest expense, Dividend, Loans and borrowings and Accumulated retained earnings. In addition, considering the strong financial position as well as Cochlear is reaching the stage of maturity in its business life cycle, we believe that the company will be able to continue maintaining the stable sale growth of 10% in the future years. As the consequence, the base percentage of sales for each account is estimated by averaging their percentage of sale item in 2010 and 2011 respectively. Since this is only a one year forecasting, we believe that this estimation is sufficient to predict the following year finance. The other exceptional accounts are forecasted as following: * Interest expense: * It is clearly that interest expense is not driven by the sale growth, instead it depends on the amount of debts that Cochlear have. Thus, it is naïve to forecast interest expense …show more content…
The price calculated is higher than the current share price because it has not taken into account the effect of the recall of the bionic product. However, this recall is voluntary from Cochlear, thus instead of signalling a bad indication, it strengthens the image of its management. This is demonstrated by the rise of recent share price after the recall. In addition, the share price chart shows that company manage to recover in such a short period during GFC, although it beared a huge effect from the crisis since its highest profit segment is the US. Thus, this indicates a strong ability to grow in the future. (See appendix
Company: Cochlear Limited (ASX: COH)
Student name: Trinh Hoang Anh Vu
Student ID: 41735765
Prospective Analysis
In this analysis, Cochlear’s income statement and balance sheet are being forecasted using mainly the percentage of sales forecasting, except the following items: Interest expense, Dividend, Loans and borrowings and Accumulated retained earnings. In addition, considering the strong financial position as well as Cochlear is reaching the stage of maturity in its business life cycle, we believe that the company will be able to continue maintaining the stable sale growth of 10% in the future years. As the consequence, the base percentage of sales for each account is estimated by averaging their percentage of sale item in 2010 and 2011 respectively. Since this is only a one year forecasting, we believe that this estimation is sufficient to predict the following year finance. The other exceptional accounts are forecasted as following: * Interest expense: * It is clearly that interest expense is not driven by the sale growth, instead it depends on the amount of debts that Cochlear have. Thus, it is naïve to forecast interest expense …show more content…
The price calculated is higher than the current share price because it has not taken into account the effect of the recall of the bionic product. However, this recall is voluntary from Cochlear, thus instead of signalling a bad indication, it strengthens the image of its management. This is demonstrated by the rise of recent share price after the recall. In addition, the share price chart shows that company manage to recover in such a short period during GFC, although it beared a huge effect from the crisis since its highest profit segment is the US. Thus, this indicates a strong ability to grow in the future. (See appendix