Blackmore Company Harvard Case Solution & Analysis

Blackmore Company Case Solution

Ratio Analysis

In order to identity the current and historical performance along with the financial position of the company, ratio analysis has been performed.

Return on Equity

The return on equity ratio determines the capability of the firm to generate return by utilizing the shareholders equity and it increases investor’s confidence in the company, as it also determines that the management of the company is operating in the best interest of shareholders. The return on equity ratio of the company is improving gradually, as it was just 33% in the year 2011; however, it rose to 70% by the end of 2015.

2011 2012 2013 2014 2015
Return on Equity
NPAT / Equity 33.0% 30.2% 24.7% 21.4% 70.1%

Return on Operating assets

The return on operating assets determines the efficiency of the management of the company in order to utilize operating assets of the company. As the company will utilize its operating assets, it would help the management of the company in maximizing the wealth of the shareholders and will also increase the investors’ confidence in bot the company, and its management.

The management of the company is operating effectively and improving operations of the company, which are financially viable for the company. The return on operating assets ratio was 22% by the end of the year 2011 but it rose to 50.7% in the end of the year 2015, which is a significant increase with respect to industry and with respect to the other similar players, which are operating in the industry.

2011 2012 2013 2014 2015
Return on Operating assets
NOPAT / NOA 22.0% 17.8% 13.9% 14.1% 50.7%

Leverage

The leverage ratio determines the capital structure of the company along with the finance risk. A higher the leverage ratio indicates that there would be greater the finance risk and a lower ratio will increase investors confidence with respect to the capital structure of the company, as low leverage ratio gives a positive image of the company to the stakeholders and potential investors. The company has maintained its capital structure by incorporating the dynamics of the capital market and of the industry as well. The management of the company is concerned about the finance risk of the company and current leverage ratio of the company clearly depicts that the company is operating well with this respect, as leverage ratio was 51.8% in the year 2011 and then reduced to 37.7% by the end of the year 2015.

2011 2012 2013 2014 2015
Leverage
NFO / Equity 51.8% 69.3% 76.8% 51.4% 37.7%
NPAT / Equity 36.7% 33.1% 29.3% 25.4% 75.0%

 Return on Net Operating Assets

The company is utilizing its assets effectively as sales over assets ratio is continuously increasing; this shows that the company has managed its asset portfolio, which is generating suitable returns for the company and the current return on assets is highest as compared to the last years. This is a positive factor for the company....................

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