Ibis World Case Study 2012
They have positioned themselves well with a strong metropolitan radio group, investment focus on growth areas, with radio expected to grow 4% year on year over the coming five years Ibis World (2015).This positions them importantly with just over 60% of proportionate earnings in growth media, compared to 44% at the end of FY13.
3. Quantitative overview
Financial ratios are useful tools for assessing a firm’s financial condition, however there are some limitations. It can be difficult to identify industry categories to which a firm belongs as firms often engage in multiple …show more content…
Normally a higher number is better because its shows a company earns more profit for every dollar of sales.
Changes in profit margins are heavily scrutinized. When the profit margin is reducing, it could be down to a number of reasons such as sales reducing or poor expense management, or cost blowouts, which would require efficiency improvements. Often a company with a low ratio would find it necessary to take on debt to pay for its costs.
Fairfax has achieved an increase in both profit margins, and is performing better than industry average on gross profit margin even though they have experienced an 8% reduction in revenue; importantly they achieved a 33% increase in Net profit margin being 8 cents for every dollar of sales. This has been a direct result from cost reduction strategies.
APN has not performed as well as Fairfax with gross profit margin due to a significant reduction in its gross profit margin of 70%, which was attributable to impairment of intangible assets. This is detailed in the annual report notes to financial statements where it was determined that there were indicators of impairment of New Zealand publishing assets arising from the challenging trading conditions. APN underperformed against industry. Its net profit margin has remained stable and performs better than …show more content…
Both companies have seen improvements in their current ratio as they both move to reduce risk by reducing short-term debt.
6. Working capital management
Days debtors shows how quickly customers are paying their accounts, and for both companies the majority of this is for advertising, and the result of this ratio has an impact on the investment in working capital. Days creditors indicate how quickly the company pays suppliers, and can indicate the use of supplier credit as a source of finance. Both companies have stable ratios that fall within acceptable range of industry average, with little change required, and little effect on any investment recommendation in this report.
7. Leverage and