From the table above, we can see that ABC’s Z Score is on negative amount in 2007, we suspect that it’s the result of their acquisitions, which mainly funded using debt. If we compare it to their performance in 2006, they were considered in the safe zone (Z Score > 2.6), which means the company is believed to survive in the future.
Volatility of the share is also increased in 2007, which represents there are more risk associated compared to the previous year, so there’s a high probability that the price will either flattened or decline in the future.Moreover, ABC Learning seems wasn’t generating enough return to justify the capital invested, since economic profitability is on negative amount during 2 years period.
Meanwhile in accounting perspective, …show more content…
7. Decision
After we pointed out our assumptions of each option, we decided to choose option 2, which means suggest Temasek to sell off all of their shares in ABC Learning. We have several justifications for it, the first one is because we aren’t sure that ABC Learning’ share price will going back to the first price point even though Temasek has done all of the actions we assumed in previous section.
Therefore, it’s better for Temasek to sell it straight away at current price rather than spend time and effort, which most likely won’t pay off as they expected.
Second reason is because the nepotism in ABC Learning has rooted for years, we doubt that although Temasek owned 12% of ownership, they might not be able to directly improve or change ABC Learning’s policy, due to there are 88% of shareholders that might not have the same perspective as …show more content…
Fourth reason is because based on the calculations provided above, we see them as a warning signs of ABC Learning’ poor performance and it is more likely that ABC Learning will suffer similar results next year rather than having improved results, therefore we consider ABC Learning as a very risky
Volatility of the share is also increased in 2007, which represents there are more risk associated compared to the previous year, so there’s a high probability that the price will either flattened or decline in the future.Moreover, ABC Learning seems wasn’t generating enough return to justify the capital invested, since economic profitability is on negative amount during 2 years period.
Meanwhile in accounting perspective, …show more content…
7. Decision
After we pointed out our assumptions of each option, we decided to choose option 2, which means suggest Temasek to sell off all of their shares in ABC Learning. We have several justifications for it, the first one is because we aren’t sure that ABC Learning’ share price will going back to the first price point even though Temasek has done all of the actions we assumed in previous section.
Therefore, it’s better for Temasek to sell it straight away at current price rather than spend time and effort, which most likely won’t pay off as they expected.
Second reason is because the nepotism in ABC Learning has rooted for years, we doubt that although Temasek owned 12% of ownership, they might not be able to directly improve or change ABC Learning’s policy, due to there are 88% of shareholders that might not have the same perspective as …show more content…
Fourth reason is because based on the calculations provided above, we see them as a warning signs of ABC Learning’ poor performance and it is more likely that ABC Learning will suffer similar results next year rather than having improved results, therefore we consider ABC Learning as a very risky