Hubei Lantian Harvard Case Solution & Analysis

1.   Financial analysis of Hubei Lantian and assessment of the company’s current performance and financial condition

As per the financial analysis of current performance and the financial condition of Hubei Lantian,it can be seen that the gross profit margin of Hubei is showing an increasing trend after the fiscal year 1997. The net profit margin is showing an increasing trend of almost 23.45%.On the other hand, the return on equity of Hubei Lantian is 19.81%, which is also higher among the rest of the competitors on the market. Hence, this can considered to be a significant growth. Therefore, by taking account of these financial ratios the current performance of Hubei Lantian can be evaluated effectively.

The other financial ratio that is of higher importance is the equity ratio, which is almost 0.77 and the debt ratio is almost 0.23 as per the Financials of Lantian. Moreover, current ratio and the quick ratio of Lantian  are lower than a minimum threshold of 1. Hence, it is also worth noticing that if Emily Wang is really going to make a purchase from this company, then there will be a need to take into account the audited financial statements as well because it will have the ability to present a clearer picture of the company.

Despite this, the other most significant ratio is cash to liability ratio which seems to be a cause of concern to Emily Wang as well as the shareholders because it is 0.30 and this may create problems in the future if the company has been acquired.Therefore,there is a need to discuss the matter with the seniors of the company by involving Emily Wang who can also prove to be helpful for the better future of the company.

Moreover, the growth rate of revenues from main businesses is reflecting a decreasing trend by a percentage of almost 57%. On the other hand,it is better and also the interest coverage ratio is improving significantly. Hence, this shows that the financial condition and the performance of Hubei Lantian do not seem to be very attractive at the moment, how every they can be improved in the future by devising effective strategies.

2.   Comparison of Hubei Lantian financial performance with its peer companies in the fishing industry and the food and beverage industry.

By taking account of the financial performance of Hubei Lantian,it can be seen in some aspects that the company is able to outperform the rivals how ever in some areas it is lacking. Moreover, it is also evident by taking account of the fishery industry and the food beverage industry that the inventory turnover ratio of Hubei Lantian is lower as compared to the rest of the competitors operating in the same industry.

Hence, it should be taken into consideration by the management of Hubei Lantian because if they are not able to turn the inventory into sales, then it may prove harmful to the company and it will result in the increased inventory holding period and as well as increased holding costs. This will in return result in the holding of working capital that Lantian will not be able to use somewhere else.

Hence, it is evident from the case that the inventory holding days are 71 for Lantian and they are lower for the rest of the rivals. As a result, this tells us that the competitors may have the ability to outperform Hubei Lantian and this may result in the worrying situation in terms of the going concern status of Lantian.

Despite this, the good thing is that Hubei Lantian was somehow able to manage its net profit margin that is higher than the rest of the competitors, which is almost 23.45%. The other thing that is working in the favor of Lantian is the return on equity, which is almost 19.81% and this is significantly higher than the rest of the competitors.

Hence, after taking into account the analysis based upon the financial performance of Hubei Lantian there are some concerns that are related to these financials. The major concern is that if Emily Wang is really willing to enter into an agreement in order to make the acquisition of Lantian then it will have to proceed with great care. Overall, it is also worth mentioning that the reason to proceed with care is because the China Securities Regulatory Commission has stated that Lantian has made a submission of fake documents based on its performance.

3.   Assessment of Hubei Lantian’s quality of earnings

By taking account of Hubei Lantian’s quality of earnings, it can be seen that is showing an increasing trend and it is a good sign for the future prospects of Lantian’s shareholders as well this is also good for the shareholders of the company that will acquire Lantian. Therefore, Emily Wang and the shareholders can be kept satisfied if there is a significant in the earnings of this company...................

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Hubei Lantian Case Solution Other Similar Case Solutions like

Hubei Lantian

Share This