Modern Technology Harvard Case Solution & Analysis

Modern Technology Case Solution

1.      Analysis of ratios and financial performance:

The below ratios show the company’s performance in generating sales and generating the profit from the assets or capital structure.

Return on Equity: The return on equity (ROE) measures the productivity identified with proprietorship. It gauges a company’s effectiveness at creating benefits from each unit of the shareholders' value. ROEs between 15 percent and 20 percent are considered as the good for the Company. The case represents ROE as the 16.1% in 2014 and 14% in 2015.

The gross profit margin shows the profitability of the company earned on every dollar of sales after deducting the cost of goods sold. The company results in 45% of gross profit margin of its sales in 2014 and 41.8% in 2015. The higher the percentage the company would be more able to retain its sales for its products and services.

Net Profit margin: The net revenue is a standout amongst the most utilized profitability ratios. The net revenue refers to the measure of benefit that an organization gains through sales. The net profit margin is extensively the proportion of benefit to aggregate sales times 100%. The higher the net revenue, the more benefit an organization acquires on every sale. It has been declined by 15.7% in 2015 and it was good in 2014 with 17%. The decrease in net margin is caused due different cost structures in both years.

Assets turnover measures the efficient use of assets to generate the sales. It results in 0.646 and 0.644 times, it is somewhat similar. This means for every dollar company generates 0.646 cents sales.

Debt to total assets: the debt ratio of company results in 32% in 2014 and 28% in 2015. The position of company is seemed to be stable as the lower the ratio, the increase in the longevity of the business.

Equity multiplier: It is used for the analyses of debt and equity or financing strategy, it results in 1.4 and 1.3 times in 2014 and 2015 respectively. Lower multiplier ratio is always measured as more conservative and more favorable than higher ratio because companies with lower ratios are less dependent on debt financing.

Current ratio: the current ratio that shows the ability of the company to pay off the short term loan and also would be helpful to overcome the problem of inventory management. The increase in ratio shows the further growing prospects of the company. But it is more than 1, which means the company has ability to pay the debt on time....................

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