Part 1

Use the five years of financial information for LYFEN and three years for LYFEN's two primary competitors, Three Squirrels and Bestore.

1. Use the appropriate finance tools that you feel are relevant to do a complete financial analysis of LYFEN and its two competitors using the information provided. Make reasonable assumptions to determine missing balance sheet information that you desire. Consider any relevant qualitative factors in your analysis and comparison. Provide a thorough interpretation of the results. (35%)
2. In your opinion, is LYFEN financially ready to engage in their desired growth objectives for the next five years? Provide support for your answer. (10%)
3. What specific recommendations would you suggest Yu make to the company's chairman, Yonglei Shi about future growth goals? (5%)

In millions of Laiyifen (Fiscal year end Dec. 31) 2018 2017 2016 2015 2014 Sales 3,891 3,602 3,201 3,104 2,838 2,054 1,548 1,757 1,444 Cost of sales 2,182 1,709 1,694 1,410 1,527 1,311 Gross profit Administrative expenses Selling expenses 436 339 284 283 271 1,275 1,106 983 974 889 132 Net income 10 101 134 136 Accounts receivable, net Accounts payable 42 26 22 28 21 621 679 539 508 414 Inventories 385 417 294 267 225 Total shareholders' equity 1,854 1,907 1,875 1,079 947 Total assets 1,878 2,841 3,001 2,769 1,632 2015 Three Squirrels (Fiscal year end Dec. 31) 2017 2016 2014 4,423 Sales 2,043 1,493 924 701 Cost of sales 3,087 Gross profit Administrative expenses 1,336 550 223 112 39 17 Selling expenses 918 497 234 Net income 237 -13 Accounts receivable, net 193 70 41 Accounts payable 532 885 377 1,168 Inventories 658 349 Total shareholders' equity 606 304 129 Total assets 2,132 1,077 652 Bestore (Fiscal year end Dec. 31) 2017 2016 2015 2014 Sales 5,424 4,289 3,149 3,828 Cost of sales 2,886 1,403 2,118 1,031 Gross profit Administrative expenses Selling expenses 1,596 351 279 218 1,055 952 719 48 Net income 118 105 Accounts receivable, net 101 74 83 Accounts payable 569 443 378 Inventories 591 617 476 Total shareholders' equity 856 419 291 Total assets 2,956 2,601 1,805 In millions of Laiyifen (Fiscal year end Dec. 31) 2018 2017 2016 2015 2014 Sales 3,891 3,602 3,201 3,104 2,838 2,054 1,548 1,757 1,444 Cost of sales 2,182 1,709 1,694 1,410 1,527 1,311 Gross profit Administrative expenses Selling expenses 436 339 284 283 271 1,275 1,106 983 974 889 132 Net income 10 101 134 136 Accounts receivable, net Accounts payable 42 26 22 28 21 621 679 539 508 414 Inventories 385 417 294 267 225 Total shareholders' equity 1,854 1,907 1,875 1,079 947 Total assets 1,878 2,841 3,001 2,769 1,632 2015 Three Squirrels (Fiscal year end Dec. 31) 2017 2016 2014 4,423 Sales 2,043 1,493 924 701 Cost of sales 3,087 Gross profit Administrative expenses 1,336 550 223 112 39 17 Selling expenses 918 497 234 Net income 237 -13 Accounts receivable, net 193 70 41 Accounts payable 532 885 377 1,168 Inventories 658 349 Total shareholders' equity 606 304 129 Total assets 2,132 1,077 652 Bestore (Fiscal year end Dec. 31) 2017 2016 2015 2014 Sales 5,424 4,289 3,149 3,828 Cost of sales 2,886 1,403 2,118 1,031 Gross profit Administrative expenses Selling expenses 1,596 351 279 218 1,055 952 719 48 Net income 118 105 Accounts receivable, net 101 74 83 Accounts payable 569 443 378 Inventories 591 617 476 Total shareholders' equity 856 419 291 Total assets 2,956 2,601 1,805