Carlton Polish Case Essay

1. Using the excel spreadsheet provided, and the recommended consequential disclosures as a basis you your analysis, what recommendations would you give Phillips on each of the items listed below? In each case, justify your recommendations and estimate how much the decision will change the “true” value of the company and its value in the eyes of an investor in a private company.

The next 3 years witnessed a continuous increase in sales and revenues. Their profit margin increased to reach 4.97% by year 1992.

It is important for Scott to have experience in different aspects of the business so that he can make well judged decisions; without experience and knowledge, the likelihood of running down a company is high

The company’s ability to generate profitability might not be constant and subject to a lot of factors.

1. In the last five years the growth in sales for the company has been around 10% per annum, except for the 1997, the growth was 18.78%. In the case, nothing is mentioned that company has made any drastic changes in its strategy to grow faster. In such a scenario, projected a consistent growth of 20% per annum for the next 5 years is too optimistic.

• Coleco is dependent on debt through years (also successful ones) • The company has a huge amount of total liabilities (in 1987 about $ 620 mln) • No resources to pay debts (Negative equity, Assets are generally composed of Accounts receivables) • Company by the moment already does not comply with the creditors requirements

Total shareholders’ equity increased $21,735,000 or 3.9% YoY. Capital stock and contributed surplus increases were quite insignificant, but accumulated other comprehensive income increased 114.4% YoY, and the accumulated deficit decreased $77,104,000 or 54.2% YoY. Other equity is now at zero from ($154,239,000) last year (refer to financial liability) due to the final payment made for the remaining 45% stake in Honsel

years, sales had increased at a 7% compound rate, while earnings, benefiting from substantial cost

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

From an operational perspective, the annual sales growth of 2% is behind the industry average of 6% per

Market value proportions of: Debt = $1,147,200 / $4,897,200 = 23.4% Pref. Share = $1,250,000 / $4,897,200 = 25.5% Common equity = $2,500,000 / $4,897,200 = 51.1%

1. Analyze the economic rationale of the Carborundum acquisition. Under what conditions an acquisition would be expected to add to shareholder value in general? Do any of these reasons apply to Carborundum acquisition?

2) Given that BT Yellow Pages accounted for 85% of the U.K. classified directories advertising revenues, we assume it would keep the market growth rate of 5.5%, above 2001 yoy data 4.9% in 2001 but below the 1996-1999 industry data

Analyse the company’s financial performance, over two years, using the following ratios (you will need to present your results):

The two methods that are used by the expert include the comparable transactions method, which uses the multiples in the market to determine the value, and also the DCF method, which is used to discount the future cash flows back to determine the current value of the shares. Different methods have different strengths and weaknesses. According to Ross (2009), the comparable transaction method is used and the strength is that it uses the historical actual transactions that are comparable to the Woolworths transaction, so that the valuation is justified by the market conditions. In the meantime, the weakness of the comparable transaction is that different transactions have different companies involved and the transactions are conducted in