Procast Inc Assignment Harvard Case Solution & Analysis

In this assignment, we attempt to analyze the performance of the subject company Procast Inc and compare its performance against two other close competitors, which are New Age Corporation and Accel Inc. The performance of each of the three companies is to be analyzed from 2001 to 2004. Procast Inc is the oldest manufacturing company among the three companies named above, it had been established 50 years ago, and the company has a long history. Under the leadership of the company, the stock price performance had been strong during the last 10 years however, the last two years had been highly difficult for the investors and the performance of stock price has been dwindling.
These changes had occurred because of the rapid market changes and not because of the changes in the business fundamentals of the industry. Therefore, based on a detailed financial analysis of the three companies, we are to rate each of the three companies in terms of performance. After this, we have to determine the set of the questions to be asked at the next scheduled board meeting. Finally, certain recommendations need to be made to the board members, keeping in view its current business strategy, to deal with the recent stock price performance.
A detailed financial statement analysis and growth analysis has been performed for each of the three companies individually and then based on the analysis, we have rated the performance for each of the three companies as shown in this section of the report.
Performance of Procast Inc
First, if we analyze the performance of Procast Incorporation, then it is evident from the ratio and growth analysis that the performance of the company is declining. The current ratio of the company is at 1.2 in 2004 however, it has been lower than one for the past three years. The quick ratio is less than one, which is alarming for the company as it lacks the liquid assets to finance the short term obligations. The days sales outstanding are increasing and the company is not receiving its outstanding cash on time.
Procast Inc Assignment Harvard Case Solution & Analysis
Similar is the case with the days sales inventory ratio, which is also high and shows the high time taken by the company to generate its raw material into work in progress and then into cost of goods sold. The fixed asset turnover ratio is low at 0.397 and the total asset turnover is 0.292, which are both low. These ratios suggest inefficient utilization of the long term assets of the company. The proportion of debt in the capital structure of the company is increasing and in 2004, there is 57.33% of debt in the capital of the company.
The increase in the debt is having a negative impact on the time interest coverage ratio as this ratio has declined from 2.259 to 2.026 in 2004. The debt in increasing but the sales and the operating income of the company is not increasing at the same pace. Although, the profit margin ratio for Procast Inc has increased over the years, along with the gross margin and operating margin ratios. However, the basic earning power has decreased which shows a decline in the profitability of the firm. The return on asset and the return on equity have been fluctuating over the years and are average figures in 2004. The equity multiplier is a good ratio, which has declined over the years........

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