Throughout this course you will prepare a comprehensive financial analysis and p

Question

Throughout this course you will prepare a comprehensive financial analysis and proposal (excluding tables, figures, and addenda) that will demonstrate your understanding of key financial concepts, strategies and practices. After selecting a company to profile, you will construct a comparative financial analysis of your selected company’s financial position with that of a prime competitor, for example, Amazon and Netflix, Microsoft and Oracle, or Bank of America and JPMorgan Chase & Co. Following the nine-step assessment process detailed in Assessing a Company’s Future Financial Health, your financial analysis and proposal will be composed of four separate component assignments in topics 2, 4, 6, and 8. For this assignment, apply the following two steps of the nine-step assessment process detailed in Assessing a Company’s Future Financial Health (i.e., Step 3: Investments in Assets and Step 4: Economic Performance)to compose further assessment of the company/competitor pairing analysis as below: Review the Management’s Discussion and Review (MDR), aka the Management’s Discussion and Analysis (MDA) section, which can be obtained from the SEC 10-K reports. Develop pro-forma financial statements for your company/competitor for the next 5 years. Pro-forma financial statements require us to make conservative assumptions about future growth; as such, your discussion must justify and support any assumptions you have made in developing the pro-formas. Discuss current strategy (ies) used by the company/competitor and any relevant future investments required to support the business unit (s) strategy(ies) to achieve higher ROI and market position. Perform a ratio analysis on the two pro-forma financial statements you’ve developed (company and competitor), and provide a discussion regarding future profitability and competitive performance as well as any significant changes you observe. To successfully complete this assignment, please show all ratio analysis calculations.

Explanation / Answer

Ans;

HCA Holdiings Forecast inputs for the present situation Inputs           Actual Forecast Operating Ratios 2014 2015 2016 2017 2018 2019 2020 Sales growth Rate 8% 7.50% 7% 6% 6% 5% 5% Supplies/Sales 17.00% 17% 17% 17% 17% 17% 17% Depreciation/Net PP&E 9% 9% 9% 9% 9% 9% 9% Salaries and benefits/Sales 45% 49% 49% 49% 49% 49% 49% Other operating exp./Sales 18% 18% 18% 18% 18% 18% 18% Cash/Sales 2% 2% 2% 2% 2% 2% 2% Accounts receivables/Sales 15% 15% 15% 15% 15% 15% 15% Inventory/Sales 3% 4% 4% 4% 4% 4% 4% Net PP&E/Sales 39% 38% 39% 39% 39% 39% 39% Goodwill & other Intangible assets/Sales 17% 17% 17% 17% 17% 17% 17% accounts Payable/Sales 6% 5% 6% 6% 6% 6% 6% Accrued salaries/Sales 3% 3% 3% 3% 3% 3% 3% OtherAccrued expenses/Sales 5% 5% 5% 5% 5% 5% 3% Tax rate 32% 32% 32% 32% 32% 32% 32% HCA Holding Forecasted income statement Values in millions Most recent 2015 Input Basis 2016 2017 2018 2019 2020 Net Sales $39,678 108% x2015 Sales for 2016 forecast $42,455 $45,427 $48,607 $52,010 $55,650 Less: Supplies 6,638 17% of sales of forecast year 7,217 7,823 8,261 8,842 9,461 Salaries and Benefits 18,115 49% of sales on the forecast year 20,803 22,259 23,817 25,485 27,269 Depreciation 1,904 9% of net PP&E on the forecast year 3,821 4,088 4,375 4,681 5,009 Other operating expenses 7,103 18% of sales on the year of forecast 7,642 8,176 8,750 9,362 10,018 Operating Income 5,918 2,972 3,181 3,402 3,640 3,893 Less: Interest expense 1,665 Carry forward from previous year 1665 1665 1665 1665 1665 Loss on sale of facilities 5 Carry forward from previous year 5 5 5 5 5 Loss on retirement debt 135 Carry forward from previous year Legal claim costs 249 Carry forward from previous year 249 249 249 249 249 Income berfore taxes 2,696 918 1.127 1,348 1,586 1,839 Allowance for tax expense 1,261 32% of income before tax for the forecast year 294 361 431 508 588 Net Income 2,696 624 766 1,079 1,078 1,251 Attributable to NCI 567 131 161 227 226 263 Attributable to HCA 2,129 493 605 852 852 988 HCA Holding Forecasted Balance Sheet Values in millions Most recent Assets 2015 Input Basis 2016 2017 2018 2019 2020 Cash and Cash equivalents 741 21% x Forecast year sales 849 909 972 1,042 1,113 Accounts Receivables 5,889 15% x Forecast Year sales 6,368 6,814 7,291 7,802 8,348 Inventories 1,439 4% x Forecast Year sales 1,698 1,817 1,944 2,080 2,226 Other Current Assets 1,163 Carry over the previous year 1,163 1,163 1,163 1,163 1,163      Total Current Assets 9,232 10,078 10,703 10,495 12,007 12,850 Net PP&E 15,014 39% x Forecast year sales 16,557 17,717 18,957 20,284 21,704 Other Assets Investments of insurance sunsidiaries 432 Carry over the previous year 432 432 432 432 432 Investments in and advance to affiliates 178 Carry over the previous year 178 178 178 178 178 Goodwill and other intangible 6,731 Carry over the previous year 6,731 6,731 6,731 6,731 6,731 Other 1,157 Carry over the previous year 1,157 1,157 1,157 1,157 1,157     Total assets 32,744 35,619 37,910 39,482 42,980 45,702 Accounts Payable 2,170 6% x Forecast Year sales 2,547 2,726 2,916 3,121 3,339 Accrued Salaries 1,233 3% x Forecast Year sales 1,274 1,363 1,459 1,560 1,670 Other accrued expenses 1,880 5% x Forecast Year sales 2,123 2,271 2,430 2,601 2,783 Long-term debt maturing in one year 233 Carry over the previous year 233 233 233 233 233      Total Current Liabilities 5,516 6,177 6,593 7,038 7,515 8,025 Long-term debt 30,255 Carry over the previous year 30,255 30,255 30,255 30,255 30,255 Professional 1,115 Carry over the previous year 1,115 1,115 1,115 1,115 1,115 Income tax and other Liabilities 1,904 Carry over the previous year 1,904 1,904 1,904 1,904 1,904 Stock-holders' deficit: Common Stock 4 Carry over the previous year 4 4 4 4 4 Accumulated other compr. -265 Carry over the previous year -265 -265 -265 -265 -265 Retained deficit -7,338 -6,242 4,612 -4,337 -2,168 -944 Stock-holders' deficit/income -7,599 -6,503 -4,873 -4,598 -2,429 1,205 NCI 1,553 Add each year's EATNCI 2,406 2,651 3,503 4,355 5,343 Total Liabilities and equities 32,744 35,619 37,910 39,482 42,980 45,702 Financial Ratios Ratio Formular Workings for 2016 2016 2017 2018 2019 2020 Profitability ratios Gross margin ratio Gross profit/Net sales 35,238/43,455 81% 83% 83% 83% 83% Operating margin Operating Income/net Sales 2,972/43,455% 7% 7% 7% 7% 7% Return on Assets Net Income/Total Assets 624/35,619 2% 2% 2% 3% 3% Return on equity Net Income/Equity 624/-6,503 -10% -16% -23% -44% 1%      Liquidity Ratios Current Ratio Current Assets/Current Liabilities(CL) 10,078/ 1.63 1.62 1.49 1.6 1.6 Acid test Ratio (Current assets-Inventory)/CL    Solvency ratios Debt to equity ratios Equity Ratio Debt ratio

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.