Question

1 Approved Answer

Posted on Jul 29, 2024

Use the reformulated financial statements for Blue Cap Limited to answer Question1 to 3. 1) Free Cash Flow Analysis 2) Profitability Analysis 3) Systematic Growth

Use the reformulated financial statements for Blue Cap Limited to answer Question1 to 3. 1) Free Cash Flow Analysis 2) Profitability Analysis 3) Systematic Growth Valuation Reformulated Balance Sheet Blue Cap Limited (in millions) 2020 2019 2018 2017 2016 Net operating assets (NOA): Operating assets Cash and cash equivalents 87.97 82.05 75.88 59.10 54.59 Accounts receivable, less allowance of doubtful accounts 1,703.90 1,821.70 1,478.00 1,001.70 1,170.40 1,107.20 2,692.80 2575.80 2,152.00 Inventories 3,509.50 1.038.80 1.755.60 Current tax assets 35.10 21.40 1.60 20.40 5,366.00 4,454.30 2942.70 2,399.60 1.341.30 Property, plant and equipment, net Goodwill 3.551.40 1,101.30 1,102.00 6XX.30 674.30 705.30 Identifiable intangible assets 2,140.20 776.50 367.10 268.30 221.60 Deferred income taxes and other assets 544.40 380.20 502.10 282.00 Right-of-use assets 939,40 Total operating assets 14.326.47 11.706.75 1001258 7.046 10 5.384.49 Operating liabilities Trade and other payables-ne-interest bearing 1.525.40 1,407,70 1.155.80 996.10 700 80 Accrued liabilities (provisions) (170.40) (190,60) 1.256.30 (287.20) (222.30) (205.30) (1.59.30) 253.70 3.20 Current tax liabilities 162.20 248.40 202.50 207.30 143.90 Defemed goverment grant 3.10 3.29 3.10 2.10 Deferred tax liabilities 352.00 168.70 193.70 138.20 119.20 138.20 Deferred government grants 40.10 34.60 37,70 35.90 35.00 31.90 Retirement benefit liabilities 347.50 307.00 255.30 336.60 221.10 Share based payments 86.50 17.20 Total operating abilitier 2.458 50 1,947-29 2.XX7.60 1.65740 2.535.70 1,064 60 Net operating asset (NO) 11,367.97 9,799.55 812498 6.647.36 5.510.40 4,819.89 Net financial assets (obligations) Financial assets Cash equivalents 778.34 497 51 50221 1,106.43 575.75 738.82 17.50 Other financial assets 10.30 9.10 3.50 3.10 Total financial amets 1.123.95 586.05 746.62 787.44 301.01 305.31 Financial liabilities 6.00 1.80 Derivative financial instruments Interest-bearing liabilities and bomowings 5.992 50 4662 30 4.356. 30 3.975.30 2,280 90 Total financial liabilities 5.992 NO Net financial assets (obligations) Common Shareholders' Equity (CSE) 3.143 30 4.662.89 4.356.30 3.975.29 3.109.30 2.282.70 (4.976.75) (3639.6D) (3.187.70 (2.648.30) (1.777.39) 5,682.30 4,455.30 3,475.60 2.862.10 (4,368,37) 6,999.10 3,042.50 2022 Final Exam Page 2 of 8 FIN324 Autumn 2022 25.80 2015 Reformulated Income Statement Sheet Blue Cap Limited (in millions, except for per share data) Operating revenue Cost of sales Gross margin Operating expenses Research and development expenses Selling and marketing expenses General and administration expenses Amortization of intangibles Total operating expenses Core operating income (before tax) Tax on operating income Income tax expense reported Tax on other operating income Tax benefit from net interest expenses Total tax on operating income Core operating income (after-tax) Other operating income (before tax) Gain on acquisition Pandemic Facility Reservation Fees Royalties and License Revenue Other income Total other operating income (before- tax) Tax on other operating income Other operating income (expense) (after-tax) Exchange differences on translation of foreign operations, net of hedges on foreign investments Actuarial losses (gains) on defined benefit plans, net of tax Total other operating income (expense) Operating income (after-tax) Financial income (NFE) Interest expense Interest income Net interest income (expense) before tax Tax benefit on net interest income Net interest income (expense) after fax Comprehensive income (available to common shareholders) 2020 8,796.6 (3,924.4) 4,872.2 (921.8) (896.2) (619.3) (72.5) (2,509.8) 2,362.4 (470.2) 106.3 (43.1) (407.1) 1,955.3 1454 158.5 50.3 354.2 (106,3) 247.9 13.3 (13.6) 247.6 2,203.0 (150.8) 7.0 43.1 (100,7) 2,102.3 2019 2018 2017 2016 2015 8,205.4 7,587.9 6,615.8 5,909.5 5,458.6 (3,761 2) (3.531.6) (3,329.4) (3,034.8) (2,605.9) 4,444.2 4,056.3 3,286.4 2,874.7 2,852.7 (831.8) (702.4) (666.9) (613.8) (462.7) (866.8) (786.2) (697.0) (620.9) (498.3) (457.0) (413.4) (371.7) (2624) (472.5) (102.3) (36.6) (25.1) (57.8) (2,003.4) (71.4) (1,848.7) (1,643.0) (2,273,4) (1.248.5) 2,170.8 2,052.9 1.437.7 1,231.7 1,604.2 (422,4) (552.3) (352.4) (313.5) (335.0) 100.0 98.2 99.4 118.7 50.8 (48.9) (29.7) (23.7) (17.3) (13.2) (483.8) (276.8) (212.1) (297.4) 1,799.5 1,569.1 1,160.9 1,019.6 1,306.8 176.1 133.4 117.7 94.0 171.1 144.8 203.3 28.7 64.9 33.9 219.7 169.4 333,2 327.4 331.2 395,8 169.4 (100.0) (98.2) (99.4) (1187) (30.8) 233.2 229.2 231.8 277.1 118.6 (34.8) (96.9) 97.5 (126.9) (444.1) (67.1) 29.6 75.5 (71.9) (64.3) 131.3 161.9 404.8 78.3 (389.8) 1,930.8 1,731.0 1,565.8 1.097.9 917.0 (176.7) (108.4) (90.0) (71.6) (59.6) 13.8 9.3 10.9 13.9 15.6 (99.1) (79.1) (57.7) (44.0) (1629) 48.9 29.7 23.7 17.3 13.2 (114.0) (69.4) (55.4) (40.4) (30.8) 1,816.8 1,661.6 1,510.4 1,057.5 886.2 The marginal tax rate from 2015 to 2019 is 30% Question 1 Calculate Free Cash flow using Method 1 and Method 2 for 2020 Question 2 Question 3 Provide a systematic analysis of growth between 2019 and 2020 Note: Growth between 2019 to 2020 only. a. Calculate the following: i. Revenue Growth ii. Growth in Common Shareholder's Equity (CSE) iii. Growth in Comprehensive Income b. Calculate the components of the change in Return on Net Operating (10 Marks) (15 Marks) a. Provide first and second-level breakdown of the company's return on common equity (ROCE) for 2018, 2019, and 2020. Use the average values in the denominator for profitability formulas were necessary. (12 Marks) b. Discuss the drivers of profitability for 2018, 2019, and 2020. (3 Marks) (20 Marks) (1 Marks) (1 Marks) (1 Marks) Assets (RNOA.) i. Change in core sales PM at previous asset turnover level (2 Marks) ii. Change due to change in asset turnover (2 Marks) iii. Change due to change in unusual items (2 Marks) (3 Marks) iv. Discuss the drivers of change in RNOA c. Calculate the components of the change in Return on Common Equity (ROCE). i. Change in RNOA (2 Marks) ii. Change due to change in spread at previous level of financial leverage (2 Marks) iii. Change due to change in financial leverage (2 Marks) iv. Discuss drivers of change in ROCE (2 Marks) Use the reformulated financial statements for Blue Cap Limited to answer Question1 to 3. 1) Free Cash Flow Analysis 2) Profitability Analysis 3) Systematic Growth Valuation Reformulated Balance Sheet Blue Cap Limited (in millions) 2020 2019 2018 2017 2016 Net operating assets (NOA): Operating assets Cash and cash equivalents 87.97 82.05 75.88 59.10 54.59 Accounts receivable, less allowance of doubtful accounts 1,703.90 1,821.70 1,478.00 1,001.70 1,170.40 1,107.20 2,692.80 2575.80 2,152.00 Inventories 3,509.50 1.038.80 1.755.60 Current tax assets 35.10 21.40 1.60 20.40 5,366.00 4,454.30 2942.70 2,399.60 1.341.30 Property, plant and equipment, net Goodwill 3.551.40 1,101.30 1,102.00 6XX.30 674.30 705.30 Identifiable intangible assets 2,140.20 776.50 367.10 268.30 221.60 Deferred income taxes and other assets 544.40 380.20 502.10 282.00 Right-of-use assets 939,40 Total operating assets 14.326.47 11.706.75 1001258 7.046 10 5.384.49 Operating liabilities Trade and other payables-ne-interest bearing 1.525.40 1,407,70 1.155.80 996.10 700 80 Accrued liabilities (provisions) (170.40) (190,60) 1.256.30 (287.20) (222.30) (205.30) (1.59.30) 253.70 3.20 Current tax liabilities 162.20 248.40 202.50 207.30 143.90 Defemed goverment grant 3.10 3.29 3.10 2.10 Deferred tax liabilities 352.00 168.70 193.70 138.20 119.20 138.20 Deferred government grants 40.10 34.60 37,70 35.90 35.00 31.90 Retirement benefit liabilities 347.50 307.00 255.30 336.60 221.10 Share based payments 86.50 17.20 Total operating abilitier 2.458 50 1,947-29 2.XX7.60 1.65740 2.535.70 1,064 60 Net operating asset (NO) 11,367.97 9,799.55 812498 6.647.36 5.510.40 4,819.89 Net financial assets (obligations) Financial assets Cash equivalents 778.34 497 51 50221 1,106.43 575.75 738.82 17.50 Other financial assets 10.30 9.10 3.50 3.10 Total financial amets 1.123.95 586.05 746.62 787.44 301.01 305.31 Financial liabilities 6.00 1.80 Derivative financial instruments Interest-bearing liabilities and bomowings 5.992 50 4662 30 4.356. 30 3.975.30 2,280 90 Total financial liabilities 5.992 NO Net financial assets (obligations) Common Shareholders' Equity (CSE) 3.143 30 4.662.89 4.356.30 3.975.29 3.109.30 2.282.70 (4.976.75) (3639.6D) (3.187.70 (2.648.30) (1.777.39) 5,682.30 4,455.30 3,475.60 2.862.10 (4,368,37) 6,999.10 3,042.50 2022 Final Exam Page 2 of 8 FIN324 Autumn 2022 25.80 2015 Reformulated Income Statement Sheet Blue Cap Limited (in millions, except for per share data) Operating revenue Cost of sales Gross margin Operating expenses Research and development expenses Selling and marketing expenses General and administration expenses Amortization of intangibles Total operating expenses Core operating income (before tax) Tax on operating income Income tax expense reported Tax on other operating income Tax benefit from net interest expenses Total tax on operating income Core operating income (after-tax) Other operating income (before tax) Gain on acquisition Pandemic Facility Reservation Fees Royalties and License Revenue Other income Total other operating income (before- tax) Tax on other operating income Other operating income (expense) (after-tax) Exchange differences on translation of foreign operations, net of hedges on foreign investments Actuarial losses (gains) on defined benefit plans, net of tax Total other operating income (expense) Operating income (after-tax) Financial income (NFE) Interest expense Interest income Net interest income (expense) before tax Tax benefit on net interest income Net interest income (expense) after fax Comprehensive income (available to common shareholders) 2020 8,796.6 (3,924.4) 4,872.2 (921.8) (896.2) (619.3) (72.5) (2,509.8) 2,362.4 (470.2) 106.3 (43.1) (407.1) 1,955.3 1454 158.5 50.3 354.2 (106,3) 247.9 13.3 (13.6) 247.6 2,203.0 (150.8) 7.0 43.1 (100,7) 2,102.3 2019 2018 2017 2016 2015 8,205.4 7,587.9 6,615.8 5,909.5 5,458.6 (3,761 2) (3.531.6) (3,329.4) (3,034.8) (2,605.9) 4,444.2 4,056.3 3,286.4 2,874.7 2,852.7 (831.8) (702.4) (666.9) (613.8) (462.7) (866.8) (786.2) (697.0) (620.9) (498.3) (457.0) (413.4) (371.7) (2624) (472.5) (102.3) (36.6) (25.1) (57.8) (2,003.4) (71.4) (1,848.7) (1,643.0) (2,273,4) (1.248.5) 2,170.8 2,052.9 1.437.7 1,231.7 1,604.2 (422,4) (552.3) (352.4) (313.5) (335.0) 100.0 98.2 99.4 118.7 50.8 (48.9) (29.7) (23.7) (17.3) (13.2) (483.8) (276.8) (212.1) (297.4) 1,799.5 1,569.1 1,160.9 1,019.6 1,306.8 176.1 133.4 117.7 94.0 171.1 144.8 203.3 28.7 64.9 33.9 219.7 169.4 333,2 327.4 331.2 395,8 169.4 (100.0) (98.2) (99.4) (1187) (30.8) 233.2 229.2 231.8 277.1 118.6 (34.8) (96.9) 97.5 (126.9) (444.1) (67.1) 29.6 75.5 (71.9) (64.3) 131.3 161.9 404.8 78.3 (389.8) 1,930.8 1,731.0 1,565.8 1.097.9 917.0 (176.7) (108.4) (90.0) (71.6) (59.6) 13.8 9.3 10.9 13.9 15.6 (99.1) (79.1) (57.7) (44.0) (1629) 48.9 29.7 23.7 17.3 13.2 (114.0) (69.4) (55.4) (40.4) (30.8) 1,816.8 1,661.6 1,510.4 1,057.5 886.2 The marginal tax rate from 2015 to 2019 is 30% Question 1 Calculate Free Cash flow using Method 1 and Method 2 for 2020 Question 2 Question 3 Provide a systematic analysis of growth between 2019 and 2020 Note: Growth between 2019 to 2020 only. a. Calculate the following: i. Revenue Growth ii. Growth in Common Shareholder's Equity (CSE) iii. Growth in Comprehensive Income b. Calculate the components of the change in Return on Net Operating (10 Marks) (15 Marks) a. Provide first and second-level breakdown of the company's return on common equity (ROCE) for 2018, 2019, and 2020. Use the average values in the denominator for profitability formulas were necessary. (12 Marks) b. Discuss the drivers of profitability for 2018, 2019, and 2020. (3 Marks) (20 Marks) (1 Marks) (1 Marks) (1 Marks) Assets (RNOA.) i. Change in core sales PM at previous asset turnover level (2 Marks) ii. Change due to change in asset turnover (2 Marks) iii. Change due to change in unusual items (2 Marks) (3 Marks) iv. Discuss the drivers of change in RNOA c. Calculate the components of the change in Return on Common Equity (ROCE). i. Change in RNOA (2 Marks) ii. Change due to change in spread at previous level of financial leverage (2 Marks) iii. Change due to change in financial leverage (2 Marks) iv. Discuss drivers of change in ROCE (2 Marks)