Live#5 financial analysis mooc

FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHELIVE SESSION #5 WEDNESDAY APRIL 2ND 2014

DEMOGRAPHIC DATA


Max density( >300)

Average density(Entre 50 et 300)

Low density(<50)

Caption

Density = 0

323

160

83

7364

Source: Introduction quizz, 1243 participants, as of 27.03.2014


Source: Introduction quizz, 1243 participants, as of 27.03.2014

Business Sector

Finance 48%

Management 36%

Other 28%

Accounting 25%

Economy 19%

Entrepreneurship 13%

Marketing 13%

Trade 8%


39%

60%

1%

Did the MOOC met yourExpectations

Yes, I liked it

Yes, it was great.

Not at all

Yes

37%

60%

2%

Did you find the work loadacceptable?

It was fine

Yes, completely

Not really

10%

48%

42%

How would you rate the Gremlin Case?

grade 1

grade 2

grade 3

grade 4

grade 5

1%1%

8%

50%

40%

How would you rate the weekly quizzes?

grade 1

grade 2

grade 3

grade 4

grade 5

Source: Satisfaction survey, 125 participants, as of 31.03.2014


Source: Satisfaction survey, 125 participants, as of 31.03.2014

Axis of improvement

No corrections for the weekly quizzes

16%

84%

Capitalise on your MOOC participation in your career?

No

Yes


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LIVE SESSION #5 WEDNESDAY APRIL 2ND 2014

FINANCIAL ANALYSIS MOOC WITH MARC BERTONECHE

Boston Medical Instruments (BMI) developed, manufactured and sold scientific medical instruments, needles and catheters which allowed rapid and less invasive access to a number of different organs and vessels.

BMI experienced extraordinary growth, fueled by heavy spending on research and development, necessary to maintain BMI’s competitive advantage and rapid expansion of its sales force.

BMI has reached the maximum level of debt (Short term debt) which the banker is ready to provide. What should the company do now?

Week 5 - Boston Medical Instruments



Your essay should start by considering the level of business risk of Boston Medical Instruments (BMI) and the ability of this company to carry or not a high amount of financial debt.

It should analyze the growth of this company and its consequences on the investments (in fixed capital and in net working capital) and on the financing of BMI in the last three years and try to assess the future cash flows (cash flow from operations and free cash flow before financing) for the two next years (2014 and 2015).

It should comment on the level of BMI‘s margins and on its profitability (ROCE and ROE) and compare its self-sustainable-growth to its actual growth.

It should finally give some recommendations on how to solve the issues facing the management of the company at the beginning of 2014 by listing and discussing the various options available to the managers of BMI.

Boston Medical Instruments - Guidelines



In thousands of Dollars 2011 2012 2013 Net sales 14 512 22 163 32 803 Cost of goods sold 6 632 10 232 15 223Gross margin 788 11 931 1 758

Selling general and administrative costs 433 6 621 1 006

Research and development 2 454 3 534 4 997

Operating Profit (EBIT) 1 096 1 776 2 523

Interest expense 351 617 988

Profit before tax 745 1 159 1 535 Income tax 253 394 522Net profit 492 765 1 013

Income Statement



In thousands of Dollars 2011 2012 2013 Cash 1 243 1 523 1 250 Accounts receivables 2 798 4 225 6 232 Inventories 4 225 6 523 9 587Total Current Asset 8 266 12 271 17 069

Gross fixed assets 1 962 2 956 3 976 Depreciation -450 -598 -773

Net fixed assets 1 512 2 358 3 203

Total assets 9 778 14 629 20 272

Balance Sheet (Assets)



In thousands of Dollars 2011 2012 2013 Short-term bank loan 2 987 6 674 10 769 Accounts payable 395 623 898 Accrued expenses 740 1 086 1 521 Current portion of long-term debt 175 175 175Total current liabilities 4 297 8 558 13 363

Long-term financial debt 125 1 075 900

Total liabilities 5 547 9 633 14 263

Equity 4 231 4 996 6 009

Total liabilities and equity 9 778 14 629 20 272

Balance Sheet (Liabilities & Equity)



In thousands of Dollars 2012 2013

Net Profit 765 1013 Depreciation 148 175 ± Change in Not Working Capital -3 151 -4 361 Cash Flow from Operations -2 238 -3 173 - Capital Expenditures -994 -102 Cash Flow before Financing Activities -3 232 -4 193

- Long Term Debt Repayment -175 -175

+ Increase in Short Term Bank Loan 3 687 4 095

Total Cash Flow 280 -273

Cash Flow Statement



Useful Formulas

Here is a list of formulas, ratios and financial figures with their relative week, that could be helpful to

answer to quiz Week 5



Week 2

• NWC - NWC turnover ratio - NWC to Sales ratio [Video 1]

• Fixed Assets Turnover [Video 1]

• Capital Expenditure to Depreciation ratio [Video 1]

• DSO (Days of Sales Outstanding) [Video 3]

• DPO (Days of Payables Outstanding) [Video 3]

• DSI (Days Sales of Inventory) [Video 3]

• CCC (Cash Conversion Cycle) [Video 3]



Week 3

• IGF (Internally Generated Funds) [Video 1]

• CFO (Cash Flow from Operations) [Video 1]

• Net Financial Debt [Video 2]

• Debt to Equity ratio - Debt coverage ratio [Video 4]

• Interest Coverage ratio [Video 4]

• Current ratio - Quick ratio [Video 4]



Week 4

• Return on Capital Employed [Video 1]

• Return on Equity [Video 1]

• EVA (Economic Value Added) [Video 2]

• SSG (Self Sustainable rate of Growth) [Video 5]



Forums Review



Forum ReviewBoston Medical Instruments:

1) How to calculate the COCE ? And is it the same as the WACC ?

2) for the interest rate, I used 4% as interest rate, again maybe I'm wrong, I don't know but that’s how I interpreted it after reading the last paragraph of the case study.

3) With reference to the formula of ROCE and ROE, which is ROE = ROCE + (ROCE-i) x D/E , can anyone tell me if this equation holds to all types of earnings, including EBITDA, EBIT, EBT and Net Profit?



Forum ReviewBoston Medical Instruments:

4) I am in process to consider the out year forecast and assume the Short Term Bank Loan (which is a credit line) would only be proportional to a percent of NWC. Does anyone have different approach?

5) Talking about interest rate, I must say I share your concerns and am rather confused



QUESTIONS



Forums Questions1) How can we calculate the "capital cost", link with the Interest

internal rate (IIR) ?

2) I understand business risk refers to the volatility of a company's earnings or operating cash flow. Is there a quantitative measure that reflects business risk?

3) Is trade credit or early invoice payment discount the quickest way to finance a firm in all times?



CONCLUSION

Economy & Finance

Live#5 financial analysis mooc