Case Study: The Warehouse Company

2423 Words 10 Pages
This report is prepared for Shalom, who is considering purchasing shares in a company, ‘The Warehouse Group’. This report is aimed to provide Shalom with an analysis of the company and the viability of the investment in shares in ‘The Warehouse Group’. The Warehouse Group consists of four major segments which are:
The Warehouse (Red Sheds)
• Torpedo 7
• Noel Lemmings
• Warehouse Stationery This company was founded by Stephen Tindall in 1982, which was a private company to the year 1994 when it was listed on the New Zealand stock exchange, therefore is then a public company, The Warehouse is the largest retail group operating in New Zealand. I recommend that Shalom should purchase shares in The Warehouse Group as for the following
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This shows us, ‘The Warehouse Group’ has successfully managed their cash well as the overall cash has increased by $5.5m within the year. The Warehouse Group also has a big increase of $5.3 m of interest, this has a negative impact on the company as the interest goes up, the more they will need to pay, but this is not big enough to make a difference within the overall amount of the company. The increase of $5.5m within the overall cash could be because of the borrowings from financing activities, as shown in the notes to and forming part of the financial statements, page 81, it states there is a roughly $48m difference between 2014 and 2015 for the borrowings are paid back between 0-6 months, rather than longer amounts of time, this is an advantage for The Warehouse Group as they aren’t waiting for the payments and have their cash. Loans repaid by finance business customers has increased from $36.4 in 2014, to $88.3m in 2015, this might be due to being interest free if paid within 60 days, so this promotes them to pay back when its needed, so this benefits the company as they are not waiting and less chance of write off/ bad debts, short term borrowing is $0.35 for every $1. For every $1 of current assets, The Warehouse Group has $0.6 for current liabilities, therefore they can ‘easily’ pay back their day-to-day expenses/debts, and then $0.4 for working capital. For this company, The Warehouse Group, the current ratio; the ability to pay short term debt, for 2014, it was 1.38 and in 2015, it was 1.60, so this means they have more ‘spare’ money to pay for their short term debts, and if not used it can be saved and invested. Liquid ratio has increased from 0.43:1 to 0.23:1, this allows the company to pay back any immediate debt (4-6 months). The interest cover is profit before interest and tax over interest expense, which is 5.9 times for 2015 and 7.2 times for 2014, which is a decrease so means

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