You are an independent investment analyst. One of your clients, Mr. Watson recently approached you about a potential investment in Make A Lot Manufacturing corporation (hereafter Make A Lot). He is an auditor and does not know how to read financial statements. Make A Lot is the parent company of a group of business engaged in the manufacturing of heavy duty machinery and value added service to heavy duty machine operators which command leadership positions in their respective markets. Mr. Watson completed analysis of the year ended 31 March 2016 and 2017. He also obtained industry ratios from a local university which keeps track of the industry. He summarized the information and presented as below. 2017 Make A Lot Industry Return on Equity 16.23% 17% Return on Assets 5.89% 12% Net Profit Margin 12.84% 12% Total Asset Turnover 0.46 times 1 time *Financial Leverage Multiplier 75 times 1.42 times BOU 2022 Page 4 of 7 Botswana Open University MASTERS January - June Sessional Structured Timed Assignment BAF912 - Accounting and Finance 2016 Make A Lot Industry Return on Equity 9.48% 15% Return on Assets 3.87% 10% Net Profit Margin 8.79% 10% Total Asset Turnover 0.44 times 1 time *Financial Leverage Mulitiplier 50 times 2.45 times *Financial Leverage Multiplier = Total Assets / Total Equity Financial Leverage multiplier uses the ratio between the company's total assets to its stockholder's equity to measure a company's financial leverage. It is an indication of a company's gearing, ie. How much debt is being used in the capital structure. Required: Comment on the Make A Lot financial information and recommend to Mr. Watson whether he should invest in the company or not. (25 marks)