Yoda Muba has finally decided to manage his investment portfolio himself and is considering the company Sativi to possibly invest in it. The company publishes its financial statements on its website, and Yoda decides to analyze certain elements before deciding whether to invest in it or not.

• You must demonstrate all the details of your calculations.

Work to do:

a) Using the balance sheet (appendix A) and the income statement (appendix B) for the years 2016 and 2017, establish the financial statements as a percentage of the company Sativi:

- Balance sheet as a percentage (%) of total assets and comment on it (maximum 50 words)

- Statement of earnings as a percentage (%) of sales and comment on it (maximum 50 words)

b) Calculate the various ratios listed in appendix C for the years 2016 and 2017. Perform the financial analysis by the ratios, indicating the strengths and weaknesses of the Sativi company (do your analysis in the order around the following ratios: liquidity, management, indebtedness and profitability).

c) Do the financial analysis using the DuPont system for the ROE only of the company Sativi by making a comparison over time (2016-2017) and a comparison with the sector. Comment on your results, highlighting the trends observed on this profitability indicator, ROE. Do you think Yoda should invest in this company? Why?

appendix A

Sativi balance sheet (in thousands of dollars) as of December 31
	2016	2017
Cash	18,460$	7,150$
Accounts	38,990$	42,024$
Inventory	54,109$	106,891$
Total current assets	111,559$	156,065$
Net fixed assets	105,284$	138,151$
Total assets	216,843$	294,216$
Accounts payable	34,948$	35,746$
Notes payable (bank)	31,993$	36,415$
Total current liabilities	66,941$	72,161$
Long-term debt	96,590$	165,700$
Total liabilities	163,531$	237,861$
Common shares	18,850$	18,850$
Retained earnings	34,462$	37,505$
Total shareholders' equity	53,312$	56,355$
Total liabilities and shareholders' equity	216,843$	294,216$

appendix B

Income statement (in thousands of dollars) as at December 31
	2016	2017
Sales	261 429$	313 715$
Cost of goods sold	235 671$	281 824$
Amortization	12 939$	16 312$
Earnings before interest and taxes	12 819$	15 579$
Interest paid	4 940$	6 240$
Profit before tax	7 879$	9 339$
Tax (30%)	2 364$	2 802$
Net profit	5 515$	6 537$

Appendix C (to be completed to answer question 2)

	2016	2017	Industry average
Liquidity ratios
Working capital ratio			1.75
Immediate cash ratio			0.90
Management ratios
Inventory turnover			2.90
Accounts receivable turnover			8.55
Total asset turnover			1.15
Debt ratios
Debt-to-equity ratio			1.40
Total liabilities / total assets			65%
Interest coverage ratio			4.5
Profitability ratios
Gross profit margin ratio			15.3%
Net profit margin ratio			4.2%
Return on shareholders' equity - ROE			9.7%