Homework SourseThroughout this course you will prepare a comprehensive fina
Throughout this course you will prepare a comprehensive financial analysis and proposal (excluding tables, figures, and addenda) that will demonstrate your understanding of key financial concepts, strategies and practices. After selecting a company to profile, you will construct a comparative financial analysis of your selected company’s financial position with that of a prime competitor, for example, Amazon and Netflix, Microsoft and Oracle, or Bank of America and JPMorgan Chase & Co. Following the nine-step assessment process detailed in Assessing a Company’s Future Financial Health, your financial analysis and proposal will be composed of four separate component assignments in topics 2, 4, 6, and 8. For this assignment, apply the following two steps of the nine-step assessment process detailed in Assessing a Company’s Future Financial Health (i.e., Step 3: Investments in Assets and Step 4: Economic Performance)to compose further assessment of the company/competitor pairing analysis as below: Review the Management’s Discussion and Review (MDR), aka the Management’s Discussion and Analysis (MDA) section, which can be obtained from the SEC 10-K reports. Develop pro-forma financial statements for your company/competitor for the next 5 years. Pro-forma financial statements require us to make conservative assumptions about future growth; as such, your discussion must justify and support any assumptions you have made in developing the pro-formas. Discuss current strategy (ies) used by the company/competitor and any relevant future investments required to support the business unit (s) strategy(ies) to achieve higher ROI and market position. Perform a ratio analysis on the two pro-forma financial statements you’ve developed (company and competitor), and provide a discussion regarding future profitability and competitive performance as well as any significant changes you observe. To successfully complete this assignment, please show all ratio analysis calculations.
Solution
Ans;
| HCA Holdiings | |||||||||||
| Forecast inputs for the present situation | |||||||||||
| Inputs | Actual | Forecast | |||||||||
| Operating Ratios | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||
| Sales growth Rate | 8% | 7.50% | 7% | 6% | 6% | 5% | 5% | ||||
| Supplies/Sales | 17.00% | 17% | 17% | 17% | 17% | 17% | 17% | ||||
| Depreciation/Net PP&E | 9% | 9% | 9% | 9% | 9% | 9% | 9% | ||||
| Salaries and benefits/Sales | 45% | 49% | 49% | 49% | 49% | 49% | 49% | ||||
| Other operating exp./Sales | 18% | 18% | 18% | 18% | 18% | 18% | 18% | ||||
| Cash/Sales | 2% | 2% | 2% | 2% | 2% | 2% | 2% | ||||
| Accounts receivables/Sales | 15% | 15% | 15% | 15% | 15% | 15% | 15% | ||||
| Inventory/Sales | 3% | 4% | 4% | 4% | 4% | 4% | 4% | ||||
| Net PP&E/Sales | 39% | 38% | 39% | 39% | 39% | 39% | 39% | ||||
| Goodwill & other Intangible assets/Sales | 17% | 17% | 17% | 17% | 17% | 17% | 17% | ||||
| accounts Payable/Sales | 6% | 5% | 6% | 6% | 6% | 6% | 6% | ||||
| Accrued salaries/Sales | 3% | 3% | 3% | 3% | 3% | 3% | 3% | ||||
| OtherAccrued expenses/Sales | 5% | 5% | 5% | 5% | 5% | 5% | 3% | ||||
| Tax rate | 32% | 32% | 32% | 32% | 32% | 32% | 32% | ||||
| HCA Holding | |||||||||||
| Forecasted income statement | |||||||||||
| Values in millions | |||||||||||
| Most recent | |||||||||||
| 2015 | Input | Basis | 2016 | 2017 | 2018 | 2019 | 2020 | ||||
| Net Sales | $39,678 | 108% x2015 | Sales for 2016 forecast | $42,455 | $45,427 | $48,607 | $52,010 | $55,650 | |||
| Less: | |||||||||||
| Supplies | 6,638 | 17% of sales of forecast year | 7,217 | 7,823 | 8,261 | 8,842 | 9,461 | ||||
| Salaries and Benefits | 18,115 | 49% of sales on the forecast year | 20,803 | 22,259 | 23,817 | 25,485 | 27,269 | ||||
| Depreciation | 1,904 | 9% of net PP&E on the forecast year | 3,821 | 4,088 | 4,375 | 4,681 | 5,009 | ||||
| Other operating expenses | 7,103 | 18% of sales on the year of forecast | 7,642 | 8,176 | 8,750 | 9,362 | 10,018 | ||||
| Operating Income | 5,918 | 2,972 | 3,181 | 3,402 | 3,640 | 3,893 | |||||
| Less: | |||||||||||
| Interest expense | 1,665 | Carry forward from previous year | 1665 | 1665 | 1665 | 1665 | 1665 | ||||
| Loss on sale of facilities | 5 | Carry forward from previous year | 5 | 5 | 5 | 5 | 5 | ||||
| Loss on retirement debt | 135 | Carry forward from previous year | |||||||||
| Legal claim costs | 249 | Carry forward from previous year | 249 | 249 | 249 | 249 | 249 | ||||
| Income berfore taxes | 2,696 | 918 | 1.127 | 1,348 | 1,586 | 1,839 | |||||
| Allowance for tax expense | 1,261 | 32% of income before tax for the forecast year | 294 | 361 | 431 | 508 | 588 | ||||
| Net Income | 2,696 | 624 | 766 | 1,079 | 1,078 | 1,251 | |||||
| Attributable to NCI | 567 | 131 | 161 | 227 | 226 | 263 | |||||
| Attributable to HCA | 2,129 | 493 | 605 | 852 | 852 | 988 | |||||
| HCA Holding | |||||||||||
| Forecasted Balance Sheet | |||||||||||
| Values in millions | |||||||||||
| Most recent | |||||||||||
| Assets | 2015 | Input | Basis | 2016 | 2017 | 2018 | 2019 | 2020 | |||
| Cash and Cash equivalents | 741 | 21% | x Forecast year sales | 849 | 909 | 972 | 1,042 | 1,113 | |||
| Accounts Receivables | 5,889 | 15% | x Forecast Year sales | 6,368 | 6,814 | 7,291 | 7,802 | 8,348 | |||
| Inventories | 1,439 | 4% | x Forecast Year sales | 1,698 | 1,817 | 1,944 | 2,080 | 2,226 | |||
| Other Current Assets | 1,163 | Carry over the previous year | 1,163 | 1,163 | 1,163 | 1,163 | 1,163 | ||||
| Total Current Assets | 9,232 | 10,078 | 10,703 | 10,495 | 12,007 | 12,850 | |||||
| Net PP&E | 15,014 | 39% | x Forecast year sales | 16,557 | 17,717 | 18,957 | 20,284 | 21,704 | |||
| Other Assets | |||||||||||
| Investments of insurance sunsidiaries | 432 | Carry over the previous year | 432 | 432 | 432 | 432 | 432 | ||||
| Investments in and advance to affiliates | 178 | Carry over the previous year | 178 | 178 | 178 | 178 | 178 | ||||
| Goodwill and other intangible | 6,731 | Carry over the previous year | 6,731 | 6,731 | 6,731 | 6,731 | 6,731 | ||||
| Other | 1,157 | Carry over the previous year | 1,157 | 1,157 | 1,157 | 1,157 | 1,157 | ||||
| Total assets | 32,744 | 35,619 | 37,910 | 39,482 | 42,980 | 45,702 | |||||
| Accounts Payable | 2,170 | 6% | x Forecast Year sales | 2,547 | 2,726 | 2,916 | 3,121 | 3,339 | |||
| Accrued Salaries | 1,233 | 3% | x Forecast Year sales | 1,274 | 1,363 | 1,459 | 1,560 | 1,670 | |||
| Other accrued expenses | 1,880 | 5% | x Forecast Year sales | 2,123 | 2,271 | 2,430 | 2,601 | 2,783 | |||
| Long-term debt maturing in one year | 233 | Carry over the previous year | 233 | 233 | 233 | 233 | 233 | ||||
| Total Current Liabilities | 5,516 | 6,177 | 6,593 | 7,038 | 7,515 | 8,025 | |||||
| Long-term debt | 30,255 | Carry over the previous year | 30,255 | 30,255 | 30,255 | 30,255 | 30,255 | ||||
| Professional | 1,115 | Carry over the previous year | 1,115 | 1,115 | 1,115 | 1,115 | 1,115 | ||||
| Income tax and other Liabilities | 1,904 | Carry over the previous year | 1,904 | 1,904 | 1,904 | 1,904 | 1,904 | ||||
| Stock-holders\' deficit: | |||||||||||
| Common Stock | 4 | Carry over the previous year | 4 | 4 | 4 | 4 | 4 | ||||
| Accumulated other compr. | -265 | Carry over the previous year | -265 | -265 | -265 | -265 | -265 | ||||
| Retained deficit | -7,338 | -6,242 | 4,612 | -4,337 | -2,168 | -944 | |||||
| Stock-holders\' deficit/income | -7,599 | -6,503 | -4,873 | -4,598 | -2,429 | 1,205 | |||||
| NCI | 1,553 | Add each year\'s EATNCI | 2,406 | 2,651 | 3,503 | 4,355 | 5,343 | ||||
| Total Liabilities and equities | 32,744 | 35,619 | 37,910 | 39,482 | 42,980 | 45,702 | |||||
| Financial Ratios | |||||||||||
| Ratio | Formular | Workings for 2016 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||
| Profitability ratios | |||||||||||
| Gross margin ratio | Gross profit/Net sales | 35,238/43,455 | 81% | 83% | 83% | 83% | 83% | ||||
| Operating margin | Operating Income/net Sales | 2,972/43,455% | 7% | 7% | 7% | 7% | 7% | ||||
| Return on Assets | Net Income/Total Assets | 624/35,619 | 2% | 2% | 2% | 3% | 3% | ||||
| Return on equity | Net Income/Equity | 624/-6,503 | -10% | -16% | -23% | -44% | 1% | ||||
| Liquidity Ratios | |||||||||||
| Current Ratio | Current Assets/Current Liabilities(CL) | 10,078/ | 1.63 | 1.62 | 1.49 | 1.6 | 1.6 | ||||
| Acid test Ratio | (Current assets-Inventory)/CL | ||||||||||
| Solvency ratios | |||||||||||
| Debt to equity ratios | |||||||||||
| Equity Ratio | |||||||||||
| Debt ratio | |||||||||||
