SciTronics Financial Performance During the 2005- 2008 Period
Read HBC ‘Assessing a Company’s Future Financial Health.’ Fill out the ratios in the case - scan them into your submission. Write a 3 page review of the plan answering the following:
1. What is your assessment of SciTronics in 2008 versus 2005?
2.Has SciTronics access to financial strength and access to finance improved or weakened over time?
3. What are the 2-3 most important questions that you would ask management as a result of your analysis? What additional (and reasonably available) information would be important if a sound analysis of SciTronics’ performance is to be made?
SciTronics Financial Performance during the 2005- 2008 Period
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SciTronics Financial Performance during the 2005- 2008 Period
The Assessment of SciTronics in 2008 Versus 2005
The financial performance of SciTronics in 2008 is a significant improvement from that of 2005. The rationale is that almost all financial metrics indicate that the firm had a better year in 2008 than in 2005. For example, the company’s profitability as a percentage of sales in 2008 was 5.74% compared to 2.34%. This scenario shows that the profit more than doubled. The same trend can be found across all profitability ratios. For instance, the return on capital in 2008 was 15.69%, while that of 2005 was 8.45%. The return on equity in 2008 was 18.67%, while that of 2005 was 8.2%. Other financial ratios indicate that 2008 is a significant improvement.
However, this assessment does not consider changes between 2006 and 2007 and only assumes that 2005 is the base year. This note is important because many companies experience growth as a year-on-year trend. Additionally, many events may have taken place during this period that may have significantly impacted this assessment. Consider that the total assets turnover in 2008 was 1.53 times compared to 1.58 times in 2005. The difference is only 0.05 times, indicating only a small change. However, these ratios are high, meaning that the company continues to improve its efficiency in the use of assets to generate revenues. The average collection period also improved from 104.29 days to 98.73. It indicates that the firm’s