Financial Analysis of Braithwaite & Co. Ltd
FINC 495 Contemporary Issues in Finance Practice
Individual Case Study Instructions
Weeks 1-7
INSTRUCTIONS:
For the Weekly Individual Case Study, write a three to four-page (900 word) report and answer the case study questions as indicated by expressing your position. Keep in mind that for the Weekly Individual Case Study you will want to
1. Read and examine the case thoroughly, highlight relevant facts, and underline key problems.
2. Focus your analysis. Identify two to five key problems. ...
3. Uncover potential solutions and/or changes needed. Review course readings, discussions, outside research, and your experience.
4. Select the best solution.
When answering Individual Case Study questions, you can showcase your ability to analyze a situation or business dilemma, identify the important issues, and develop sound conclusions that flow from your analysis.
For this reason, it's important to use a logical framework for breaking down and analyzing the case. Therefore, the following template for analyzing a case study is a useful guide.
Preliminary Work
Critical reading of the case
o Make notes and highlight the numbers and ideas that could be quoted.
o Provide a general description of the situation and its history.
o Name all the problems you are going to discuss in your report.
o Specify the theory used for the analysis.
o Present the assumptions that emerged during the analysis, if any.
Analysis of the Case
Executive Summary of the Case
o Describe the purpose of the current case study.
o Provide a summary of the company.
o Briefly introduce the problems and issues found in the case study
o Discuss the theory you will be using in the analysis.
o Present the key findings
Focusing the Analysis
o Single out as many problems as you can, and briefly mark their underlying issues. Then make a note of those responsible. In the report, you will use two to five of the problems, so you will have selection to choose from.
o Describe the detected problems in more detail.
o Indicate their link to, and effect on, the general situation.
o Explain why the problems emerged and persist.
FINANCIAL ANALYSIS OF BRAITHWAITE & CO. LTD: A ROLLING STOCK COMPANY CASE 1
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Executive Summary
Measuring business performance is a critical activity in every organization since it allows management and stakeholders to understand where their company stands. As a result, the primary goal of this case is to comprehend and analyze various financial ratios and problem analyses using Braithwaite & Co. Limited’s history and financial position from the given case study document (Kumar & Dhingra, 2022). Braithwaite is a completely owned company by the Government of India, under the ministry of the railway. This firm was founded and registered in 1976. It is a multinational engineering company that produces railway wagons, pressure tanks, bogies (also known as chassis), cranes, and machinery (Kumar & Dhingra, 2022). Its financial statement results from 2015 to 2019 reveal the business's instability, which may have resulted from the various problems we are going to discuss. This case therefore will give an excellent overview of financial analysis concepts including liquidity ratios, profitability ratios, capital structure or leverage ratios, and activity ratios. By discussing, the theories behind all of these ratios to determine the cause of this organization's financial trend and offer the necessary recommendations.
The Analysis and Findings
Braithwaite Loss-Making Problem
As previously said, Braithwaite has been losing money in an unpredictably consistent manner from 2015 to 2019. This can be discussed using the revenue and net earnings analysis table reflected in (Table1). For example, in the year 2015, the company lost INR 4,461.03 lakh in total. This is thought to have been triggered by a price drop in the wagon, which is the company's main trading product. Notably, the loss has increased the organization's risk in that specific region, as measured by leverage ratios. To explain this argument practically we can take the debt-to-equity ratio which should be as low as feasible because it shows the proportion of debt in each currency of equity. This is not the situation in Braithwaite, where the ratio is 2015 was 2.4929, which is quite high (Kumar & Dhingra, 2022). Following this fact therefore the corporation should consider inventing a new means of resolving the loss-making sequence.
Fortunately, in the years 2019 and 2018, the company was able to boost its profit margins slightly. The availability of wagon orders for the Indian Ministry of Railways may easily be defined as the cause for this. This gave Braithwaite the final pricing on a wagon order of 1,500 units, which had been given with a provisional price before the start of the 2018–19 fiscal year(Kumar & Dhingra, 2022). As a result, the debt-to-equity ratios for 2019 were as low as 0.1632, indicating that if the company can ensure there is an increase in sales at a good selling price profitability, this risk will be eliminated ("Return on Investment: The Ultimate Guide", n.d.).
Braithwaite Rolling Stock Issue
Given that Braithwaite is a rolling stock conglomerate operating in the rolling stock business, with its primary source of revenue being railway wagon production. As a result, the rolling stock return on investment should accommodate the essential assumptions for the company to achieve profit and stability in its business. Now, return on investments (ROI) are profitability measures that businesses use to evaluate the amount of money spent on a project to the amount of money earned on the same project. The net profit ratio (Table 5) and return on equity ratios (Figure 1) from the case study can be good illustrat...