Agility Business Evaluation - Research Paper Example

May 23, Agility_Business Evaluation Introduction The Agility Company, with headquarters in Kuwait, is engaged in the logistics business (Agility, 2014). The company focuses on delivering the products of its clients to different locations around the world. The research centers on the feasibility of investing funds into the Agility Company. The research focuses on the profitability of future Agility Company revenue generation. Investment in the Agility is a viable investment alternative. Objective The objective of the research is determining whether it is profitable to invest funds in the Agility logistics Company. The research brings forth the seriousness of research on the possibility of generating returns or dividends from the Agility Company. Methodology To accomplish the objective, financial statement analysis is used. The analysis entails the use of ratios. The ratios will indicate the relationship between tow financial statement variables. The ratios include the liquidity ratios, profitability ratios, and leverage ratios. The research includes the use of trend analysis forecasting tool to predict the future profitability of investing in the Agility Company (Daft 615). Results_Analysis Profitability_Ratios Table 1 Profitability_Ratios The profitability ratios indicate the Agility Company’s capacity to generate enough revenues in one accounting period needed to pay for its current expenses and costs of the same accounting period (Daft 615). The gross_profit margin_ratio was arrived at by dividing the company’s annual gross_profit by the company’s annual total_revenues. The ratio indicates the relationship between the company’s gross profit and the company’s net revenues. Table 1 shows that the company’s gross_profit margin_ratio for 2010 (0.323) is unfavorably lower than the company’s 2009 gross_profit margin_ratio, 0.389. Table 1 shows that the company’s gross_profit margin_ratio for 2011 (0.307) is unfavorably lower than the company’s 2010 gross_profit margin_ratio. Table 1 shows that the company’s gross_profit margin_ratio for 2012 (0.286) is unfavorably less than the company’s 2011 gross_profit margin_ratio (Agility, 2014). Further, the net_profit margin_ratio was arrived at by dividing the company’s net_profit by the company’s total_revenues (Agility, 2014). Table 1 shows that the company’s net_profit margin_ratio for 2010 (0.016) is unfavorably less than the company’s 2009 net_profit margin_ratio, 0.097. Table 1 shows that the company’s net_profit margin_ratio for 2011 (0.0.026) is favorably highe than the company’s 2010 net_profit margin_ratio. Table 1 shows that the company’s net_profit margin_ratio for 2012 (0.031) is favorably more than the company’s 2011 net_profit margin_ratio (Daft 615). Furthermore, the company’s earnings_before Interest & taxes margin_ratio was arrived by dividing the company’s earnings_before Interest & taxes by the company’s annual total_revenues (Agility, 2014). Table 1 shows that the company’s net_profit margin_ratio for 2012 (0.038) is favorably higher than the company’s 2011 earnings_before Interest & taxes margin_ratio, 0.022. Table 1 shows that the company’s net_profit margin_ratio for 2013 (0.051) is favorably more than the company’s 2012 earnings_before Interest & taxes margin_ratio (Daft 615). Moreover, the company’s return_on assets_ratio was arrived at by dividing the company’s net_income by the company’s total_assets (Agility, 2014). The ratio shows the company’s capacity to use its total assets to generate net profits. Table 1 shows that the company’s return_on assets_ratio for 2010 (0.016) is unfavorably less than the company’s 2009 return_on assets_ratio, 0.087. Table 1 shows that the company’s return_on assets_ratio for 2011 (0.022) is favorably more than the company’s 2010 return_on assets_ratio. Table 1 shows that the company’s return_on assets_ratio for 2012 (0.028) is favorably higher than the company’s 2011 return_on assets_ratio. Table 1 shows that the company’s return_on assets_ratio for 2013 (0.038) is favorably more than the company’s 2012 return_on assets_ratio (Daft 615). Further, the company’s return_on equity_ratio was arrived at by dividing the company’s net_income by the company’s total_equity (Agility, 2014). The formulas shows how the company’s shareholders’ equity contributed to the generation of net profits. Table 1 shows that the company’s return_on equity_ratio for 2010 (0.027) is unfavorably less than the company’s 2009 return_on equity_ratio, 0.163. Table 1 shows that the company’s return_on equity_ratio for 2011 (0.035) is favorably more than the company’s 2010 return_on equity_ratio. Table 1 shows that the company’s return_on equity_ratio for 2012 (0.045) is favorably more than the company’s 2011 return_on equity_ratio. Table 1 shows that the company’s return_on equity_ratio for 2013 (0.059) is favorably more than the company’s 2012 return_on equity_ratio (Daft 615). Liquidity_Ratios Table 2 Liquidity_Ratios The liquidity ratios measure the company’s capacity to use its available assets to pay its maturing liabilities (Daft 615). The current_ratio was arrived by dividing the company’s current_assets by the company’s current_liabilities (Agility, 2014). The current_ratio shows how much current assets are available to pay the currently maturing current_liabilities. Table 2 shows that the company’s current_ratio for 2010 (1.321) is unfavorably less than the company’s 2009 current_ratio, 1.620. Table 2 shows that the company’s current_ratio for 2011 (1.190) is unfavorably lower than the company’s 2010 current_ratio. Table 2 shows that the company’s current_ratio for 2012 (1.197) is favorably more than the company’s 2011 current_ratio. Table 2 shows that the company’s current_ratio for 2013 (1.192) is unfavorably less than the company’s 2012 current_ratio. Further, the quick_ratio was arrived by dividing the company’s quick assets (cash equivalents + accounts receivables) by the company’s current_liabilities (Agility, 2014). The ratio shows the company’s ability to use its most_liquid current assets to pay the currently maturing liabilities. Table 2 shows that the company’s quick_ratio for 2010 (1.077) is unfavorably lower than the company’s 2009 quick_ratio, 1.294. Table 2 shows that the company’s quick_ratio for 2011 (0.943) is unfavorably less than the company’s 2010 quick_ratio. Table 2 shows that the company’s quick_ratio for 2012 (0.980) is favorably more than the company’s 2011 quick_ratio. Table 2 shows that the company’s quick_ratio for 2013 (0.980) is similar to the company’s 2012 quick_ratio (Daft 615). Leverage_Ratios Table 3 Leverage_Ratios The leverage ratios show how much resources were generated from debts or investor’s inputs (Daft 615). The debt_ratio was arrived at by dividing the company’s total_liabilities by the company’s total_assets (Agility, 2014). The ratio shows the company’s debt amounts used for acquire the commpany’s resources. Table 3 shows that the company’s debt_ratio for 2010 (0.383) is unfavorably lower than the company’s 2009 debt_ratio, 0.466. Table 3 shows that the company’s debt_ratio for 2011 (0.358) is favorably higher than the company’s 2010 debt_ratio. Table 3 shows that the company’s debt_ratio for 2012 (0.365) is favorably higher than the company’s 2011 debt_ratio. Table 3 shows that the company’s debt_ratio for 2013 (0.368) is similar to the company’s 2012 debt_ratio. Further, the company’s debt to_equity ratio was arrived at by dividing the company’s total_liabilities by the company’s total_shareholders equity figure (Daft 615). The ratio how much of the company’s resources are generated from debts or investor’s inputs (Agility, 2014). Table 3 shows that the company’s debt to_equity ratio for 2010 (0.621) is unfavorably lower than the company’s 2009 debt_ratio, 0.872. Table 3 shows that the company’s debt to_equity ratio for 2011 (0.557) is unfavorably less than the company’s 2010 debt_ratio. Table 3 shows that the company’s debt to_equity ratio for 2012 (0.575) is favorably more than the company’s 2011 debt_ratio. Table 3 shows that the company’s debt to_equity ratio for 2013 (0.575) is the same as the company’s 2012 debt_ratio. Operating_Performance Ratio Table 4 Operating_Performance Ratio The operating_performance ratio shows the relationship of the company’s profits to the generated net revenues (Daft 615). The fixed_assets turnover_ratio was arrived at by dividing the company’s total_revenues by the company’s noncurrent_assets (Agility, 2014). The noncurrent assets are composed of property, equipment, as well as plant assets. Table 4 shows that the company’s fixed_assets turnover_ratio for 2010 (6.337) is favorably higher than the company’s 2009 fixed_assets turnover_ratio, 6.278. Table 4 shows that the company’s fixed_assets turnover_ratio for 2011 (6.033) is unfavorably less than the company’s 2010 fixed_assets turnover_ratio. Table 4 shows that the company’s fixed_assets turnover_ratio for 2012 (6.825) is favorably more than the company’s 2011 fixed_assets turnover_ratio. Table 4 shows that the company’s fixed_assets turnover_ratio for 2013 (7.387) is favorably more than the company’s 2012 fixed_assets turnover_ratio. Horizontal_Analysis Table 5 Horizontal_Analysis The horizontal_analysis part of the financial report decision making is grounded on comparing the financial performance of the company between two or more accounting periods (Brechner 494). Initially, table 5 shows the total_revenue changes from 2009 to 2013 (Agility, 2014). Table 5 shows that the company’s total_revenue for 2010 (KD1,605,702,000) is unfavorably less than the company’s 2009 total_revenue, KD 1,705,442,000. Table 5 shows that the company’s total_revenue for 2011 (KD1,330,915,000) is unfavorably lower than the company’s 2010 total_revenue. Table 5 shows that the company’s total_revenue for 2012 (KD1,417,750,000) is favorably more than the company’s 2011 total_revenue. Table 5 shows that the company’s total_revenue for 2013 (KD1,375,692,000) is unfavorably less than the company’s 2012 total_revenue. Further, table 5 shows that the company’s annual_profit for 2010 (KD 24,568,000.00) is unfavorably less than the company’s 2009 annual_profit, KD 155,761,000 (Brechner 494). Table 5 shows that the company’s annual_profit for 2011 (KD 31,265,000.00) is unfavorably less than the company’s 2010 annual_profit. Table 5 shows that the company’s annual_profit for 2012 (KD 40,641,000.00) is favorably more than the company’s 2011 annual_profit. Table 5 shows that the company’s annual_profit for 2013 (KD 53,049,000.00) is favorably more than the company’s 2012 annual_profit. Comparing the earnings_per share_figure from 2009 to 2013, table 5 shows the Agility Company generated the highest earnings_per share amount, KD 156, during 2009 and generated the lowest earnings_per share_figure during 2010, KD 25 per share (Agility, 2014). Horizontal_Analysis: Percentage Table 6 Horizontal_Analysis: Percentage Table 6 shows the same table 5 output using the percentage format (Brechner 494). The table 6 indicates that the company favorably generated the highest total_revenue amount increase during 2010 to 2011 accounting period, 6.524 percent. The highest total_revenue decrease during 2009 to 2010, -17.113 percent decrease (Agility, 2014). The table 6 indicates that the company generated the highest total_revenue amount increase during 2010 to 2011 accounting period, 6.524 percent increase and the highest total_revenue decrease during 2009 to 2010, -17.113 percent decrease. Further, the company favorably generated the highest profit increase during 2012 accounting period and 2013 accounting period, 30.531 percent. However, the company unfavorably generated the only annual profit decrease during 2009 accounting period, -84.227 percent. The company generated the highest earnings_per share payment during 2012 accounting period and 2013 accounting period, 30.531 percent. The same company produced the only earnings_per share decrease during 2009, -84.015 percent. Vertical_Analysis (Balance_Sheet) Table 7 Vertical_Analysis ( Balance_Sheet) Table 7 shows the vertical_analysis of Agility Company’s balance_ sheet (Brechner 503). The total current_assets favorably generated the highest percentage in relation to total assets of the same accounting period within the 2009 accounting period, 45.95 percent (Agility, 2014). On the other hand, the company generated the lowest total_current assets to total_assets ratio during 2013, 35.21 percent. The company generated the highest share_capital to total equity ratio during 2013, 12.26 percent. The company produced the lowest share_capital to total equity ratio during 2009, 10.99 percent. The company generated the highest share_premium to total equity ratio during 2013, 17.02 percent. The company produced the lowest share_premium to total equity ratio during 2009, 16.02 percent. The company generated the highest total_current assets to total_liabilities ratio during 2011, 84.50 percent. The company produced the lowest total_current assets to total_liabilities ratio during 2009, 60.88 percent. Vertical_Analysis (Income_Statement) Table 8 Vertical_Analysis (Income_Statement) Table 8 shows the vertical analysis of Agility Company’s income _statement (Brechner 503). The company generated the highest net revenues to logistics & freight_forwaring revenue ratio during 2009, 38.90 percent (Agility, 2014). The company generated the lowest net revenues to logistics & freight_forwaring revenue ratio during 2012, 28.58 percent. The company generated the highest profit to logistics & freight_forwaring revenue ratio during 2009, 9.66 percent. The company generated the lowest profit to logistics & freight_forwaring revenue ratio during 2010, 1.63 percent. Forecast: Average_Growth EPS Table 9 Forecast: Average_Growth EPS Table 9 shows the average earnings_per share_growth rate of Agility (Brechner 711). The highest growth rate occurred during 2013, 0.37. The lowest growth rate occurred during 2010, -0.84. The increase in growth rate is grounded on the increase in the company’s net revenues or decrease in the company’s expenses. The highest average price_to earnings_ratio occurred during 2010, 20.87. The lowest average price_to earnings_ratio occurred during 2009, 3.66 (Agility, 2014). Forecast (P/E) Table10 Forecast (P/E) Table 10 shows the forecasted_fair value (stock_price)based on price_to earnings_ ratios (Diebold 49). The average sales to share ratio is 1.03. The average price to_sales ratio was 329.51. The average growth_of sales to share ratio is unfavorably pegged at -0.05. Overall, the average_growth of the company’s earnings_per share was 0.16. The average earnings_per share figure is favorably shown at KD 71.06 (Agility, 2014). Forecast P/BV /Ratio Table 11 Forecast P/BV /Ratio Table 11 shows the forecast of future price to earnings amount (Agility, 2014). The forecast is grounded on the Price to book value factor. The price forecast for 2014 is KD 489.56. The fair value accounting concept is used in the forecasting activity (Diebold 49). Forecast P/Sales Ratio Table 12 Forecast P/Sales Ratio Table 12 shows the forecast of future price to earnings amount (Agility, 2014). The forecast is grounded on the Price to sales factor. The price forecast for 2014 is KD 395.32. The same fair value accounting concept is implemented (Diebold 49). Conclusion The above discussion shows the different ratios used for deciding whether to continue investing in Agility Company. The profitability ratios indicate it is profitable to invest funds in the Agility Company. The liquidity ratios indicate the company is liquid, can easily pay maturing debts from the current assets. The leverage ratios affirm the company must increase debts in order to increase available financial resources need to continue the business operations. The fixed_assets must be maximized to increase the fixed_assets turnover ratio. The horizontal analysis and vertical analysis indicate investing in the Agility Company is viable. Forecasting indicates the company will generate profit-generating revenues. Evidently, investing funds into Agility Company will profitably generate high net revenues. Works Cited: Agility Company. Annual Report. Kuwait: Agility Company, 2014. Print. Brechner, Robert. Contemporary Mathematics for Business & Consumers. New York: Cengage Learning , 2011. Print. Daft, Richard. Fundamentals of Management. New York: Cengage Learning, 2014. Print. Diebold, Francis. Yield Curve Modeling and Forecasting. Princeton: Princeton University Press, 2013. Print. Read More